Understanding Legal Entity Identifier for Risk Analysis

1. Legal Entity IdentifierWhat it Means to You Linda F. Powell Office of Financial Research http://www.federalreserve.gov/pubs/feds/2011/201107/201107abs.html

2. Framing the Problem • City National Bank in California • ID_RSSD = 63069 • FDIC Certificate id = 17281 • SEC CIK = 275216 • SWIFT id = CINAUS6L • Cusip and various vendor ids = Proprietary • 14 banks named City National Bank • 147 banks with a variant of the name City National Bank • To combine data from different sources you need a mapping of possible identifiers

3. Add the Complexity of Changes • Address changes • Name changes • Charter or organization type changes • Mergers and other corporate actions result in multiple changes

4. How Would an LEI Help • Analyze risk of regulated entities including entity parents and affiliates • Combine data from various sources • Look at entities or panels of entities over time • Aggregate a company’s exposure to other companies • Determine the economy’s exposure to a company • Identify exposure to counterparties • Settle transactions and payments

5. What Should an LEI Look Like? • Cover entities engaged in financial markets • Adhere to industry best practices • Unique, persistent, neutral, extensible, … • Be publicly available • Provide incentives for participants • Have an efficient registration process • Have a quality assurance process • Have a relationship with an open standard • Provide sufficient reference data

6. Comparable to ISO 17442 Reference Data – First Step • Official name of the legal entity • Address of the headquarters of the legal entity • Address of legal formation • Date of the first LEI assignment • Date of last update of the LEI • Date of expiry, if applicable • Reason for the expiry • LEI that acquired the expired entity • Official business registry, where applicable • Reference id, where applicable

7. Reference Data – Second and Third Steps • Relationship Data • Who owns who and how • Corporate Actions • Entity Details • Industry classification • Organization type

8. Events to Date • The last 20 years – Academics, regulators, and practitioners discuss the need for an LEI • 2010 - Regulators start discussing how to create an LEI • November 2011 - G20 mandated the FSB to convene an Expert Group to develop a framework for an LEI • June 2012 – The G20 endorsed the FSB’s report and mandated the creation of an Implementation Group • November 2012 – The G20 endorsed the FSB’s proposed charter to create the Regulatory Oversight Committee

9. Perfect Storm • Mature Ideas • Financial Crisis • Regulatory Reform - Dodd-Frank Act Requires: • The creation of the Office of Financial Research • Regulation of over-the-counter derivatives was divided between the CFTC and SEC • Other countries are creating similar legislation

10. Next Steps FSB Report June 8, 12012

11. Governance Framework • Regulatory Oversight Committee (ROC) – Regulators and other government or supranational entities engaged in regulating or monitoring the financial system or markets • Central Operating Unit (COU) - Foundation (or legal equivalent) subject to ROC oversight • Board of Directors (BoD) from private sector • Central operational arm of the LEI System • Local Operating Units (LOU) – Entities connected with COU by an agreement to comply with standards

12. What’s Next • Many Details to be worked out • Preliminary LEIs are being issued and require international coordination • Working with private sector organizations including financial firms, academics, standards organizations, data aggregators, and commercial companies • Committed to meeting the Financial Stability Board / G20 deadline to launch the global LEI in March 2013