May 31, 2012 - The International Organisation of Standardisation (ISO) has published a standard for Legal Entity Identifiers, designed to provide unambiguous identification of counterparties engaged in financial transactions.
The new standard, ISO 17442:2012, describes a 20-character alphanumeric code, as well as additional elements for reference data attributes. The Financial Stability Board (FSB) which is overseeing the LEI project, has approved the spec, and set out a timeframe for a global launch in March 2013.
The FSB has opted for a federated system in which national authorities determine the allocation and distribution of identifier codes - a role which had previously been coveted by interbank messaging body Swift.
James Whittle, convenor of ISO/TC 68 working group WG 6, responsible for the LEI standard, explains the benefits of ISO 17442 as follows: "LEIs can be assigned to a legal person or structure that is organised under corporate laws of any jurisdiction. These entities include, but are not limited to, all financial intermediaries, banks and finance companies, all entities listed on an exchange, all entities that trade stock or debt, partnerships and pension funds, all entities under the purview of a financial regulator and their holding companies and supranationals."
The creation of the new global ID is seen as a critical element in removing the systemic risks facing the industry when unwinding outstanding transactions in the event of a major counterparty defualt.