Korea Securities Depository underlines importance of LEI issuance

By Lee Min-hyung

Global financial authorities are on rapid track to introduce Legal Entity Identifier (LEI) codes as a crucial means of risk management and effective financial data collection, the Korea Securities Depository (KSD) said Tuesday.

The LEI assigns standardized ID codes to all legal entities around the world that engage in financial transactions, according to the KSD. The organization has for years promoted the need to introduce the LEI here and abroad, as this enables authorities to swiftly realize financial losses and potentially ensuing market risks at times of financial volatility ― such as the 2008 global financial crisis.

The LEI code consists of a 20-digit reference number that enables clear and unique identification of legal identities, according to the securities depository. The names of corporations and their detailed legal information ― such as office address and corporate registration number ― are managed under the LEI, according to the KSD.

In October 2017, the KSD received official accreditation from the Global Legal Entity Identifier Foundation over the introduction of the LEI system. The depository has since gone all-out to raise awareness of the service for its wider usage here.

The KSD underlined the importance of using the system, citing cases from developed countries such as the United States and European nations.

“For now, authorities in the U.S. and Europe make it mandatory for legal entities to use the LEI when they engage in over-the-counter derivatives transactions,” an official from the KSD said.

The European Union is particularly expanding LEI usage for more legal entities taking part in financial transactions there, after the Markets in Financial Instruments Directive II took effect on July 2018. The implementation makes it easier for regulators to track relevant data and handle any potential financial problems in a more effective manner, according to the KSD.

The KSD has also played a central role in promoting the LEI by starting an LEI issuance service for Korean corporations in January 2015.

As of the end of August this year, the KSD has issued and managed 985 LEI codes out of the total 1,445 LEIs issued locally, according to the financial organization.

The KSD charges a relatively cheaper commission fee for its LEI service, compared with its counterparts in the U.S. and Europe, and it also offers special commission discounts for small- and medium-sized enterprises.