CCIL to issue globally compatible legal-entity identifiers

Move to ensure improvement in financial data systems

The Reserve Bank of India (RBI) has selected the Clearing Corporation of India Limited (CCIL) — the clearing and settlement agent in government securities, money market and forex market — as a local operating unit to issue globally-compatible “legal-entity identifiers”.

A legal-entity identifier is a 20-character unique identity code assigned to entities that are parties to a financial transaction.

CCIL will issue unique identifier codes to all eligible and desirous legal entities participating in financial markets across the globe on a non-profit cost recovery basis. Once the infrastructure in this regard is set up, the use of legal entity identifier numbers could be mandated for over-the-counter derivative transactions as well as large borrowers.

Implementation of the system is spearheaded by the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system. CCIL’s functioning as a local operating unit will be under the regulation and oversight of RBI. Considering CCIL’s systemic importance in financial markets regulated by RBI, the central bank had in July 2013 designated CCIL as a critical “financial market infrastructure” for oversight. Last week, it was granted the status of “qualified central counterparty”.

The global financial crisis underscored the lack of a common and accurate identification system for parties undertaking transactions globally and provided a renewed spur to the development of a global identifier system.  International regulators have recognised the importance of the legal-entity identifier as a key component of necessary improvements in financial data systems.