Global regulators emphasise the importance of Legal Entity Identifiers (LEIs)

29 March 2024

In today’s financial world, the Legal Entity Identifier (LEI) has become an essential tool for uniquely identifying companies and financial institutions. Several recent regulatory announcements emphasise the growing importance of the LEI in promoting transparency and simplifying data management in global markets.

Netherlands: Violations of LEI regulations lead to sanctions

The Netherlands Authority for the Financial Markets (AFM) recently held a company accountable for non-compliance with reporting requirements. These regulations require disclosure of the LEI number and maintenance of the ‘ISSUED’ status. The case highlights the need for companies to regularly renew their LEIs to avoid breaching regulatory requirements and risking penalties.

Australia: New LEI focus for counterparties and central entities

In Australia, the Australian Securities and Investments Commission (ASIC) plans to tighten the requirements for counterparties and central counterparties from 2024. In future, they will have to renew their LEI numbers at regular intervals to ensure that the associated reference data is always up to date. This measure is intended to improve risk management in the industry and increase the quality of the data available to the supervisory authorities.

USA: CFTC tightens regulations on OTC derivatives

The Commodity Futures Trading Commission (CFTC) has introduced new rules for OTC derivatives in the US. Since January 2024, all credit, interest rate, foreign exchange and equity swaps transactions must be reported using unique product identifiers (UPIs) and LEI numbers. These changes are intended to help regulators prevent market manipulation more effectively by giving them access to more comprehensive transaction data.

Why LEIs are essential for global markets

The regular renewal of LEIs is crucial to ensure that all companies involved in global markets can be identified. Regulators worldwide continue to emphasise the role of the Legal Entity Identifier as a key tool for market transparency and as a means of compliance. Companies participating in these markets must ensure that their LEI numbers remain valid to ensure compliance with these standards.

Conclusion: The growing role of the LEI in the global financial system

Recent regulatory developments in the Netherlands, Australia, and the US clearly show that the Legal Entity Identifier (LEI) is increasingly taking on a central role in the financial markets. Organisations should be aware of the importance of renewing their LEI numbers and ensuring that their data is always up to date to meet the requirements of regulators.