We believe that recommending use of pre-LEIs as unique identification codes for supervisory purposes for credit and financial institutions in the European Union would be appropriate.
The use of pre-LEIs is already well underway, not just in the EU, but also beyond. The result is that the coverage of pre-LEIs amongst leading banks and other financial institutions has rapidly increased in recent months, and indeed the coverage is already larger than the BIC scheme which was mentioned in the consultation as a possible alternative.
It makes sense to build on this growth, and for regulators that are part of the global LEI Regulatory Oversight Committee (ROC) to leverage the pre-LEI as the default unique identifier for regulatory reporting requirements going forward. This would provide a degree of certainty for the industry. The increased pre-LEI coverage would also provide a valuable tool to assist the financial industry with its own risk management. As such, we believe that pre-LEIs issued by endorsed pre-Local Operating Unit (LOUs) and eligible for inclusion in the GLEIS scheme, should be used as the unique identifiers for the reporting required from EU credit and financial institutions by the EBA.
By way of further background, SWIFT and DTCC jointly provide the CICI utility service, which to date has issued over 90,000 pre-LEIs, and which was one of the five LOUs recently endorsed by the ROC. Over 100,000 pre-LEIs have been issued by ROC endorsed pre-LOUs so far. All such pre-LEIs issued in accordance with agreed principles, will be eligible for inclusion in the upcoming global legal entity identification (GLEIS) system. The European Securities and Markets Authority (ESMA) recently confirmed that pre-LEIs issued by endorsed pre-LOUs, including the CICI utility, should be used in EMIR derivatives reporting to trade repositories, starting in February 2014. In addition many European financial market entities have already acquired pre-LEIs in order to comply with similar derivatives reporting requirements which came into effect in the US in early 2013. Financial market participants active in derivatives trading in some key Asian markets will also be required to acquire, and use, pre-LEIs for reporting to trade repositories in those markets over the coming months.
We can confirm that the costs from the CICI utility for the registration of a pre-LEI, and the annual maintenance fee, are correctly shown in the costs table in the consultation document. The costs for acquiring pre-LEIs from all the pre-LOUs have been kept to a minimum, and we believe that the operational benefits from the use of such unique identifiers will continue to grow with increased coverage. Furthermore, the benefits would accrue incrementally and the costs reduce proportionately to the extent that pre-LEIs (and eventually LEIs) are accepted or mandated for existing or incoming regulatory reporting requirements.
From the perspective of an pre-LOU, the twin timelines of the end of March 2014, and the end of December 2014, present no issues, since our Utility is already fully operational for issuing pre-LEI codes. The issuance process is scalable, and could cope with substantial increase in demand should this result from a new reporting requirement.