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HomeThe benefits of the legal entity identifier for monitoring systemic risk
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This paper discusses the importance of the Legal Entity Identifier (LEI), particularly its role in monitoring systemic risk, and provides background material for Recommendation ESRB/2020/12 on identifying legal entities in order to support its implementation in the European Union. In a global economy, there is a considerable degree of interconnectedness among legal entities, both within the financial sector and between the financial and non-financial sectors. This needs to be monitored to better ensure financial stability. In particular, the ability to uniquely identify entities, along with knowledge of how entities are interlinked, is necessary in order to measure and manage the risk of contagion among entities, sectors and countries.At the global level, the LEI has been given the important role of unequivocally identifying legal entities involved in financial transactions. The LEI is useful to regulators and other authorities for evaluating systemic risk (particularly in times of crises such as the current coronavirus (COVID-19) pandemic), conducting market surveillance and enforcement, supervising market participants, implementing resolution decisions, preparing high quality financial data and undertaking other public functions. Other advantages are also available to the wider financial industry, non-financial industry and academics. The LEI allows the private sector to foster improved risk management, increased operational efficiency and more accurate calculation of exposures, as well as addressing other needs. The LEI has benefits over other identifiers that currently exist at national or regional level. The global nature of the LEI is important because (i) trade and financial streams do not stop at the border of the European Union and (ii) many European entities are part of, or otherwise directly connected to, entities in other parts of the world. Properly identifying (parties within) such group structures is only possible with a global identifier. Therefore, the LEI is best suited to the purpose of monitoring financial stability.
- Zveřejněno:
- Témata: Finanční prostředky Společenství
- Téma: finanční dohled , finanční předpisy , finanční riziko , finanční stabilita , právní postavení
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| ISSN 2467-0669 | ISBN 978-92-9472-230-0 | DOI 10.2849/436741 | Katalogové číslo DT-AC-21-001-EN-N |
- Released on EU publications website:
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