FSB supports increased use of the LEI to improve cross-border payments

28 august 2024

In a recently published consultation report, the Financial Stability Board (FSB) has recommended the increased use of the Legal Entity Identifier (LEI) to improve data standardisation and harmonisation for cross-border payments. This recommendation is part of the efforts launched in the G20 Roadmap to Improve Cross-Border Payments in October 2020.

Why the LEI is crucial for cross-border payments

Using the LEI as a standardised global identifier can reduce the complexity associated with the different implementations of rules and standards in different jurisdictions. The LEI enables accurate, instant, and automatic identification of legal entities across national borders. This is particularly important in a complex global payments ecosystem where fragmentation and lack of interoperability can lead to delays, high costs, and limited trust.

FSB recommendations to promote the LEI

In its report, the FSB made several recommendations to promote harmonisation and interoperability between data frameworks for cross-border payments. One of these recommendations emphasises the role of the LEI as a key identifier that has the potential to increase the efficiency of payments and facilitate compliance with regulatory requirements. Unlike other identification codes, such as the Business Identifier Code (BIC), the LEI is independent of specific networks and available to all legal entities worldwide, making it a universal tool for the financial industry.

Global acceptance of the LEI is increasing

The industry’s momentum to include the LEI in cross-border payment messages is growing steadily. For example, the Committee on Payments and Market Infrastructures (CPMI) recently recognised the LEI as an equivalent identifier to the BIC to improve the identification of financial institutions and legal entities in payment messages. This recognition emphasises the increasing importance of the LEI in the global economic landscape.

Extended application possibilities of the LEI

In addition to cross-border payments, the LEI also offers significant advantages in other areas. For example, it can help simplify global supply chains, optimise trade and increase digital security through the verifiable LEI (vLEI). These benefits demonstrate how the LEI can help improve efficiency and security in the digital economy.

Call for participation in the consultation

The GLEIF (Global Legal Entity Identifier Foundation) calls on all market participants to participate in the FSB’s ongoing consultation and express their support for the LEI. The consultation period ends on 9 September 2024.