FSB to Promote Broader Adoption of LEI in Cross-Border Payments

The FSB (Financial Stability Board) has published a new report exploring options to improve the adoption of the LEI (Legal Entity Identifier), particularly for use in cross-border payments.

​Fazzaco Business Awards 2022 Officially Kicks Off

In 2012, G20 Leaders encouraged global adoption of the LEI to support authorities and market participants in identifying and managing financial risks. With widespread coverage already achieved in OTC derivatives and securities markets, the FSB is now exploring the benefits that could accrue from using the LEI in cross-border payments.

In the new report, the FSB has set out recommendations and options to promote broader LEI adoption to assist in achieving the goals of the G20 roadmap to enhance cross-border payments.

Under the roadmap, several initiatives have already been launched to reduce frictions in the data processes used for cross-border payments – including to promote the use of common message formats, data exchange protocols, conversion and mapping approaches.

To further enhance cross-border payments, the FSB is examining the use of the LEI as a global unique identifier to link account information in payment transactions. "This could facilitate straight-through processing, reducing costs, enhancing accuracy and increasing speed in transactions. It could also assist market participants in meeting KYC requirements," the report said.

The report – produced in collaboration with GLEIF (Global LEI Foundation), the LEI Regulatory Oversight Committee (ROC) and national authorities – asks FSB member jurisdictions to explore ways to promote the use of LEI, particularly outside the financial sector, "before exploring the possibility of introducing other identifiers locally".

The FSB also recommends jurisdictions consider adding the LEI as a requirement in newly created or amended regulations, directives and legislation relevant to cross-border payments where entity identification is needed.

"The FSB and member jurisdictions should support, as appropriate, ROC's and GLEIF's initiatives to address obstacles to broader LEI adoption … including the validation agent model, bulk registration and vLEI [verifiable LEI] in continuing the work of the G20 roadmap," the report said.

The report also encourages ROC members and GLEIF to set up pilot projects to explore standards for including the LEI in payment messages and the potential benefits to financial institutions of doing so.

The FSB will review progress in implementing the recommendations and publish a progress report by end-2024, together with a review of progress by standard-setting bodies to consider ways to embed or enhance references to the LEI in their work.