US Treasury Applauds FSB Progress On LEIs

by Glen Shapiro, LawAndTax-News.com, New York

24 January 2012

The United States Treasury has reiterated its support to the Financial Stability Board (FSB) in its “progress in making the global financial system more transparent and less vulnerable to excessive risk-taking through the creation of a Legal Entity Identifier (LEI) Expert Group.”

It was pointed out that, during the financial crisis, market participants and regulators did not have the information they needed to assess global exposures to risky or failing companies. In the US, the Treasury’s Office of Financial Research (OFR) has advanced the establishment of LEIs, a global standard that will enable regulators and companies around the world to, for the first time, quickly and accurately identify parties to financial transactions.

As the LEI will improve the ability of both regulators and market participants to mitigate risks posed to the financial system by, for example, providing a better understanding of true exposures and interconnections among and across financial companies, it is hoped that the formation of the LEI Expert Group by the FSB will build on the work of the OFR and its global counterparts.

In fact, in November last year, the G-20 Leaders Cannes Summit Communiqué stated that: “We support the creation of a global LEI which uniquely identifies parties to financial transactions. We call on the FSB to take the lead in helping coordinate work among the regulatory community to prepare recommendations for the appropriate governance framework, representing the public interest, for such a global LEI by our next Summit.”

The FSB’s LEI Expert Group will be comprised of public officials from around the world, including the US, and supported by an industry advisory panel. The FSB has committed the group to deliver concrete proposals by April on the implementation of a global LEI system for review by the FSB and delivery to the G-20 at the June 2012 Summit.

The US Treasury confirmed that, in its opinion, the aggressive timeline for making progress on the LEI initiative is “great news”, and that it is ready to help make sure the FSB can meet these ambitious and important deadlines.

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