Why do we need a global LEI?

The establishment of a global LEI system will be a significant achievement in responding to the vulnerabilities of the global financial system and will provide meaningful long-term benefits for both the public and private sectors. When Lehman Brothers collapsed in 2008, financial regulators and private sector managers were unable to assess quickly the extent of market participants’ exposure to Lehman or to explore quickly and fully how the vast network of market participants were connected to one another. Subsequently, the financial crisis exposed the depth of the problem of identifying financial connections and underscored the long-standing need for a global system to identify and link data, which will enable financial regulators and firms to better understand the true nature of risk exposures across the financial system.

When industry adopts the global LEI, data reported both externally to supervisors and internally for risk management purposes will be more reliable. The global LEI will enhance the ability of regulators to monitor and analyze threats to financial stability and the ability of risk managers to evaluate their companies’ risks. It will facilitate improved micro-prudential and macroprudential risk analysis, supervision, and regulation; reduce cost for industry in collecting, cleaning, and aggregating data, and in reporting data to government regulators; reduce private firms’ operational risks and improve their internal risk management; and enhance industry’s market discipline.