FSB urges wider use of the LEI but hurdles remain

Posted on October 27, 2024 by Editor

The Financial Stability Board (FSB) has released an updated progress report on the implementation of the Legal Entity Identifier (LEI) which was introduced in 2012 to standardise identification of counterparties in financial transactions globally.

The FSB continues to champion the LEI as a central tool in advancing cross-border payments, improving financial data standardisation, and supporting Know-Your-Customer (KYC) processes. The report highlights the LEI's increasing potential to enhance transparency and security in financial systems.

Since 2019, the number of active LEIs globally has surged by 84%, reaching 2.6 million. While it has become indispensable in over-the-counter (OTC) derivatives and securities markets, its use cases have gradually expanded across the financial sector, especially in areas such as sanctions screening and data harmonisation. Authorities, including the Bank for International Settlements and the Financial Action Task Force, recognise the LEI's benefits for bolstering cross-border financial operations.

Yet, when it comes to cross-border payments, the LEI's adoption has been slower than hoped. The FSB points to familiar stumbling blocks: costs, particularly in lower-income jurisdictions, and a bit of a "what's in it for me?" mindset among some market participants. To counter this, the FSB reiterates its 2022 recommendations, urging jurisdictions to accelerate LEI implementation and proposing additional steps for oversight authorities and standard-setting bodies to promote wider adoption.

Want the full scoop? Check out the FSB's report here.