Luxembourg central bank sponsors LuxCSD for the role of a Pre-Local Operating Unit as part of the Global LEI System
The Central Bank of Luxembourg is sponsoring LuxCSD for a key role in the establishment of the new Global Legal Entity Identifier (LEI) System which global regulators hope will bolster the safety of the financial system.
As part of the Global LEI System initiative, LuxCSD’s role has been extended from a Central Securities Depository to a ‘Pre-Local Operating Unit’ for Luxembourg. The Regulatory Oversight Committee (ROC) – which brings together global regulators – has allocated the 4-digit prefix #2221 to LuxCSD as the sponsored Pre-LOU for Luxembourg. Following the completion of the ROC endorsement process, LuxCSD will initiate its Pre-LEI issuance services
Private sector and local implementation of the new LEI system will be conducted through Local Operating Units (LOUs), selected on the basis of their local infrastructure knowledge and business practices.
To meet this challenging new mandate, LuxCSD has agreed a strategic collaboration with DTCC (The Depository Trust & Clearing Corporation) to provide the infrastructure for the LuxCSD LEI services to all Luxembourg-based entities.
The combination of LuxCSD’s local expertise, with DTCC's proven Global Market Entity Identifier (GMEI) utility, operated in collaboration with SWIFT, will provide all Luxembourg entities - including the financial sector - with a fully integrated and robust financial infrastructure.
Patrick Georg, General Manager of LuxCSD said: “Our new mandate to become Luxembourg’s Pre-LOU and the partnership with DTCC’s GMEI utility, the world’s largest and most recognized global Pre-LOU, allows us to serve the needs of local market players in the most efficient way. The new role reinforces LuxCSD’s commitment to strengthen Luxembourg’s financial center in compliance with international standards.”
Pierre Thissen, Vice-Chairman of the Board of Directors at LuxCSD and Head of Market Infrastructure and Payment Systems at the Banque Centrale du Luxembourg (BCL), commented: “As a member of the LEI ROC, the BCL is committed to the financial stability objectives of the global LEI system. With LuxCSD and the GMEI utility, we will now have a state-of-the-art infrastructure in place which will best serve the needs of Luxembourg-based entities.”
William Hodash, Managing Director, Business Development at DTCC, added: “The collaboration between DTCC and LuxCSD on the provision of pre-LEIs is consistent with the missions of both organisations as operators of financial market infrastructures, including CSDs. Combining LuxCSD’s local market relationships and expertise with the legal entity reference data validation and the pre-LEI issuance capabilities of the GMEI utility will help drive forward the federated operating model of the Global LEI System and serve Luxembourg clients requiring pre-LEIs in a very efficient manner.”
About LuxCSD
LuxCSD is jointly (50/50) owned by the Central Bank of Luxembourg (BCL) and Clearstream International S.A. LuxCSD offers custodians and distributors across Europe excellent custody and added value services built on a highly efficient settlement process with access to many counterparties. Settlement of securities transactions in central bank money reduces risk for financial market participants. The CSD fully supports dematerialised securities as these will significantly reduce inefficiencies, risks and costs for the industry. LuxCSD can also advise issuers in dematerialising existing physical securities.
The company was created in July 2010 within the context of the future implementation of the Eurosystem’s TARGET2-Securities (T2S) initiative. LuxCSD will provide the Luxembourg financial market infrastructure with a national access point to T2S and so will enable Luxembourg market participants to reduce their settlement risks as delivery versus payment (DVP) settlement in central bank money is widely recognised as the safest way to achieve securities settlement. This is an important factor in helping the Luxembourg market to remain competitive as a financial centre once the new European settlement infrastructure is established.
The company’s commitment in May 2012 to join TARGET2-Securities marked another milestone in the young life of the Luxembourg CSD. In March 2013, LuxCSD received the approval of the European Central Bank (ECB) to make its Securities Settlement System eligible for use in the collateralisation of Eurosystem credit operations. LuxCSD is based on the competence of its founding shareholders, each bringing their respective expertise in risk-free central bank money and cross-border securities processing to the venture.
Further information: luxcsd.com
Notes to the editors:
The Global Legal Entity Identifier (LEI) initiative
Following the 2008 crisis and the complicated analysis of positions and transactions that this caused, public authorities and the financial industry agreed to put in place a uniform global system for legal entity identification. For regulators, the LEI helps to increase their systemic risk analysis capabilities and the aggregation of risk exposures, and thus financial stability. For the industry it will make the aggregation of risks and hence risk management in firms more accurate. When a financial entity that is a counterparty on financial transactions is under financial pressure, the analysis by regulators and its counterparties would be facilitated as the LEIs would make it possible to identify the legal owner of holdings and ultimately, in future phases, accurately map the relationships between the entity, its parents and its affiliates, guarantors and obligors.
The Legal Entity Identifier (LEI) is a 20-digit, alpha-numeric code that connects to key reference information that enables clear and unique identification of companies participating in global financial markets.
The Regulatory Oversight Committee (ROC) is a committee of authorities from around the world working to coordinate and oversee the global system of legal entity identification.
The ROC, a stand-alone committee established after recommendations by the international Financial Stability Board (FSB) and subsequent endorsement by the Group of 20 (G-20) nations, held its inaugural meeting in January 2013. According to the FSB Report to the G-20, the ROC oversees the GLEIS so that 'there is a unique identifier for each entity that registers, and that there are reliable, while flexible, operational principles and standards applied to the origination and maintenance of an LEI.'
Pre-LOUs are the local implementers of the global system within a federated operating model. The ROC-endorsed pre-LOUs will become LOUs and the pre-LEIs will become LEIs when the central operating unit is formed and the ROC declares the Global LEI System fully operational.
About DTCC’s the Global Markets Entity Identifier (GMEI) utility
The Global Market Entity Identifier (GMEI) utility, for¬merly known as the CICI utility, is DTCC’s (The Depository Trust & Clearing Corporation’s) Legal Entity Identifier (LEI) solution offered in collaboration with SWIFT. GMEI is designed to create and apply a single, universal standard identifier to any organization or firm involved in a financial transaction globally and was developed in response to the financial crisis of 2008-2009 after governments and regulators called for new financial market regulation.
DTCC and SWIFT designed the GMEI utility with the assistance of a consortium of 14 global financial services organizations led by the Global Financial Markets Associa¬tion (GFMA). It is designed to meet global requirements across all asset classes. The solution went live in August 2012, and has since been endorsed at a global level by the Regulatory Oversight Committee (ROC), the global group of regulators established by the Group of 20 (G20) and the Financial Stability Board (FSB) to oversee development of the Global LEI System. This endorsement means that codes assigned by the GMEI utility are now recognized as pre-LEIs by all of the more than 50 regulators that are members of the ROC. The GMEI utility operates as a pre-Local Operating Unit within the Global LEI System. The website for the GMEI utility is www.gmeiutility.org.
About DTCC
DTCC has operating facilities and data centers around the world and, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions for thousands of institutions worldwide. With over 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide. User owned and industry governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to the financial markets. In 2013, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 139 countries and territories valued at US$43 trillion. DTCC’s global trade repository processes tens of millions of submissions per week.
For more information, visit dtcc.com, or follow on Twitter: @The_DTCC