By end 2022, LEIs will be used in securities and derivatives trading, risk monitoring, regulatory reporting, listed company supervision and the digital yuan ecosystem.
The PBOC (People’s Bank of China) has announced a new 2020-2022 roadmap for the implementation of the LEI (Legal Entity Identifier) as part of the ‘One Belt One Road’ initiative.
The PBOC announced the launch of China’s LEI system in December 2014, as part of efforts to keep pace with international developments. The PBOC is itself a member of the LEI Regulatory Oversight Committee, and has been actively working to promote the adoption and use of the LEI nationwide.
The implementation of the LEI in China will help to connect with the international market, support China’s opening up of the financial sector, and facilitate cross-border trade and financial transactions, the PBOC said in a statement, issued in conjunction with the CBIRC (China Banking and Insurance Regulatory Commission) and CSRC (China Securities Regulatory Commission).
The roadmap outlines key milestones for the implementation of LEIs in China from 2020 to 2022.
By end 2020, at least 30,000 Chinese entities will have LEIs*, covering financial institutions, financial infrastructures, member institutions of industry associations, and listed companies – for use in RMB cross-border payments, digital cross-border business, QFII and RQFII access, derivatives trading, securities trading and listed company supervision.
Rules will be issued requiring securities issuers using the services of the CSDs (central securities depositories), as well as public debt issuers, to hold LEIs. Northbound Stock Connect investors will also be able to use the LEI as a valid identity document.
In addition, rules will be proposed to enable the use of LEIs in reporting large-value transactions, suspicious transaction reporting, RMB cross-border payments, and securities financing transactions.
A mechanism will also be established to map LEIs to financial institution codes, social credit codes and financial infrastructure information systems. The LEI will also be promoted for use within CIPS (Cross-Border Inter-Bank Payments System), and LEI assignment will be complete for all institutions authorised to operate within the new digital yuan ecosystem.
By end 2021, at least 50,000 Chinese entities will have LEIs, focusing on importers and exporters, trading companies, and other non-financial enterprises participating in cross-border transactions, where the LEI will be increasingly used in financial market reporting systems, credit ratings, and to identify overseas institutions.
Rules will be formulated regarding the use of LEIs in RMB cross-border business and for the digital yuan. Participants in OTC derivatives will be required to have LEIs, as will exchange-traded derivatives trading venues and brokerage firms.
New rules will also start to require insurance companies, reinsurance companies, and insurance holding companies to use the LEI when submitting regulatory data to the CBIRC.
The mapping and update mechanism will also expand to include areas such as corporate credit, anti-money laundering, and large and small payments managed by the PBOC.
A cross-border legal entity information service and digital certification platform will also be launched to provide LEI-based data and value-added services to financial management departments, financial infrastructures, industry associations and financial institutions.
Major commercial banks will also be able to register LEIs under an agency registration mechanism. Similar mechanisms will be explored for trade associations and e-commerce platforms.
By end 2022, at least 100,000 Chinese entities will have LEIs, increasing coverage of non-financial companies participating in cross-border transactions.
The LEI will be applied in cross-border financial transaction supervision, cross-border and cross-market financial risk monitoring, systemic risk monitoring, financial stability monitoring, and regulatory reporting.
The full roadmap is available here.
*Note: As of 18 December 2020, there are a total 35,559 active LEIs in China, according to data from GLEIF (Global Legal Entity Identifier Foundation).