In principle we are supportive of the use of pre-LEIs. The key challenge will be ensuring that the local operating units (LOUs) of the pre-LEI are able to process what will no doubt be a very high number of requests and registrations, particularly in the case of a last minute rush which could place severe stress on the LOUs. Thought also needs to be given to how firms will migrate from pre-LEIs to actual LEIs in due course.
It is currently unclear as to who has jurisdiction over subsidiaries; if a firm has a presence in multiple countries, some of which do not have an LOU, is the EBA aware of what the approach will be in these instances?
We believe the initial costs of implementing the LEI should not be too onerous. Whilst, it is too early to assess any future costs of using the LEI, we are concerned that additional implementation costs may be incurred if the LEI infrastructure has;
- Inconsistent data standards across LOUs. Data fields currently differ between LOUs, this could lead to further data being requested at a later date.
- Part implementation of the ISO standard, e.g. business registry ID consultation is still underway. (http://www.leiroc.org/publications/gls/lou_20131103.pdf)
- Unclear and untested operational capacity to process the registrations effectively and in a timely manner to meet the proposed LEI based reporting obligations, specifically given other LEI related regulation due within Q1 2014 under EMIR. It would be unfortunate if the push to use LEI more widely was compromised by data quality and integrity issues from the outset.
We would suggest the EBA consider phasing in what entities will require a LEI. For many firms there will be a very high number of entities needing an identifier, many of which will rarely (if ever) actually be involved in activity that needs reporting. It would help smooth the implementation of the LEI of some thought could be given to how the LEI could be prioritised for entities that will need the code from the go-live date, and allow the others to be assigned a code at a later date.
Based on factors such as materiality, business activity and status (e.g. dormant or non- trading), it would seem disproportionate to have to register all entities to meet FINREP deadlines or indeed to register them at all. In particular, FINREP template 40 requires an entity-by-entity breakdown of the group structure, including the LEI Code. We would be concerned if this meant there was a requirement for all subsidiaries of a firm to register for an LEI code to meet that requirement alone. A number of our members have many hundreds of subsidiaries, most of which would not otherwise need to apply for a LEI.
This will take some of the pressure of the LOUs, and provide firms with a better opportunity to complete their internal on-boarding and system updates.