The so-called Legal Identity Identifier (LEI) of the Chamber of Commerce has been recognised worldwide by regulators since the start of this year. The Chamber of Commerce is one of the worldwide issuers of the LEI. The LEI is a 20-digit number that is unique in the world and that can be used to identify a legal entity. This worldwide recognition has been issued upon recommendation of the AFM following assessment of the Chamber of Commerce systems.
Within the EU, the LEI will be used initially to provide all companies that conclude derivatives contracts or facilitate the conclusion thereof with an identification that is unique in the world. This allows them to comply with their reporting obligations concerning derivatives contracts.
Why a LEI code?
The universal use of the LEI codes is important, because as of February 2014 companies are required to report all of their new and their outstanding derivatives to dedicated data warehouses with an ESMA licence: the so-called Trade Repositories (TR). This follows from the new European
Market Infrastructure Regulation (EMIR) that entered into force on 16 August 2012. These companies are required to use the LEI codes in their reporting to these trade repositories in order to identify themselves, the beneficiary of the transaction, the other party and all parties that facilitate the transaction. The LEI was issued several months ago in the Netherlands, but it was not yet recognised worldwide.
That is now the case. What does the introduction of the LEI mean for the AFM's supervision?
All companies in the EU countries that have concluded at least one derivatives contract should apply for a LEI before February 2014. This applies not just to financial undertakings, but also, for example, to small and medium-sized enterprises (SME's) with an interest swap combined with a mortgage loan. The AFM monitors that companies report their derivatives correctly. This means, among other things, that they must be able to report their own LEI. Banks, insurers and pension funds are under EMIR supervision by DNB.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.