During the financial crisis, market participants and regulators did not have the information they needed to assess exposures to risky or failing companies globally. In the United States, the Dodd-Frank Act addressed this gap by creating the Office of Finacial research, or OFR, to improve the information we have about our financial system. One of the OFR’s most important initiatives to date has been advancing the establishment of a legal entity identifier, or LEI, 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. The OFR believes 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.
The Financial Stability Board, or FSB, recently announced progress in making the global financial system more transparent and less vulnerable to excessive risk-taking through the creation of an LEI Expert Group. The formation of the LEI Expert Group will build on the work of Treasury’s OFR and its global counterparts in advancing the LEI initiative. The OFR has played an active role to help build international consensus and facilitate adoption of a global LEI standard and we are excited to support the Expert Group in its efforts.
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. Included in this proposal will be recommendations for the appropriate governance framework for implementation of the global LEI initiative, as requested at the G-20 Cannes Summit in November 2011. This aggressive timeline for making progress on the LEI initiative is great news and we stand ready to help make sure the FSB can meet these ambitious and important deadlines.
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