LEI are a 20-digit unique code to identify parties to financial transactions worldwide. Following the global financial crisis, the Legal Entity Identifier (LEI) code is conceived at the initiative of ‘Group of 20, financial stability Board’. In US and Europe, the regulations require the use of LEIs to uniquely identify counterparties to transactions in regulatory reporting.
The LEI will serve as a proof of identity for a financial entity, help to abide by regulatory requirements, facilitate transaction reporting to Trade Repositories. The Public authorities in their jurisdictions rely on the LEI to evaluate risk, take corrective steps and, if required, minimize market abuse and improve the accuracy of financial data.
LEIs are issued by “Local Operating Units” (LOUs) of the Global LEI System endorsed by the Regulatory oversight Committee and LOUs accredited by the LEI foundation. Some of these registries serve a given country while other offer services to entities worldwide. In India, Legal Entity Identifier India Limited (LEIL) which is a wholly owned Subsidiary of the Clearing Corporation of India Ltd (CCIL) established as Local Operating Unit (LOU). The entity which wants to register LEI will be required to submit the necessary documents including Board Resolution and / or Power of Attorney in the format as specified by LEIL.
The Reserve Bank of India vide circular RBI/2016-17/314 FMRD.FMID No.14/11.01.007/2-16-17 dated June 01, 2017 has mandated the implementation of the LEI system for all participants in the Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives in India, in a phased manner. As per RBI’s communiqué (Nov2, 2017) all bank borrowers having total fund based and non-fund based exposure of crore and above to obtain Legal Entity Identifier (LEI) in a phased manner as indicated below.
It has been decided to require banks to make it mandatory for corporate borrowers having aggregate fund-based and non-fund based exposure of ₹ 5 crore and above from any bank to obtain Legal Entity Identifier (LEI) registration and capture the same in the Central Repository of Information on Large Credits (CRILC). This will facilitate assessment of aggregate borrowing by corporate groups, and monitoring of the financial profile of an entity/group. This requirement will be implemented in a calibrated, but time-bound manner.
Schedule for implementation of LEI in India
Total Exposure to Scheduled Commercial banks to be completed by
₹ 1000 crore and above : Mar 31, 2018
Between ₹ 500 crore and ₹ 1000 crore : Jun 30, 2018
Between ₹ 100 crore and ₹ 500 crore : Mar 31, 2019
Between ₹ 50 crore and ₹ 100 crore :Dec 31, 2019
RBI has asked Banks to encourage large borrowers to obtain LEI for their parent entity as well as all subsidiaries and associates. Borrowers who do not obtain LEI as per the schedule are not to be granted renewal / enhancement of credit facilities.
What is Global Legal Entity Identifier Foundation (GLEIF)?
The Global Legal Entity Identifier Foundation (GLEIF) is established by the Financial Stability Board in June 2014, to support the implementation and use of the Legal Entity Identifier (LEI). The foundation is backed and overseen by the LEI Regulatory Oversight Committee, representing public authorities from around the globe that have come together to jointly drive forward transparency within the global financial markets. GLEIF is headquartered in Basel, Switzerland.