The DTCC/SWIFT legal entity identifier (LEI) solution is the most effective in terms of data consistency and uniformity, according to research by Tabb Group and Alacra.
Research and consultancy firm Tabb teamed up with Alacra, a workflow solutions company, to assess the competitiveness of 14 LEI providers around the world.
The research also found, however, that the LEI process faces challenges, as relatively small percentages of businesses have an LEI number so far. Only 15 percent of entities with a credit rating have an LEI number, as well as 15 percent of entities listed on global exchanges. Meanwhile, 17 percent of organisations with a SWIFT BIC code have one, and 51 percent of European Banking Association entities.
“The LEI process continues to face challenges,” said Alan Samuels, Alacra vice president of reference data solutions.
He added: “While many are properly set up, a large percentage of them were issued to organisations not engaged in financial markets transactions, let alone complex derivatives transactions that LEIs were developed to track.”
LEIs are required by regulators in order to identify firms and counterparties that are engaged in financial transactions.
For the Tabb and Alacra research, Tabb compared the consistency and uniformity of LEI providers, including the London Stock Exchange, the National Settlement Depository and Takasbank, using aggregated data from P-LEI.org.
Alacra offered an in-depth analysis of the LEIs available, comparing them against other global rated, regulated and listed counterparties and entities.
Larry Tabb, founder and CEO of Tabb Group, said: “Having a consistent, uniform database is only part of the picture in implementing an effective LEI system.”
“Ensuring appropriate entities are covered is, if not more, important. Although the LEI universe is growing, the universe of relevant and covered institutions isn’t. To better gauge this, we partnered with Alacra to track important LEI adoption statistics.”
“Alacra’s process for assessing and tracking ongoing LEI relevance to the financial services industry enables us to have greater insight into whether LEIs being created are relevant to institutions, regulators and the health of the industry.”
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