ISIN-to-LEI Mapping: ​Creating a more transparent financial system

​There are billions of people in the world, millions of companies and hundreds of thousands of companies trading and listed on the various stock exchanges. We use 'identifiers' as a means to differentiate and make each entity uniquely identifiable amongst the masses. Two of the primary identifiers used in finance are the ISIN and the LEI Numbers.

The International Securities Identification Number (ISIN)

The International Securities Identification Number (ISIN) was first utilised in 1981, but was not fully adopted for another decade. The ISIN number (ISO 6166) is a globally recognised identifier used for recognising particular financial instruments such as securities, bonds, futures, stocks, trusts and more. The ISIN is an extended version of the US Committee on Uniform Security Identification Procedures (CUSIP number).
 
Some nations, particularly in the EU have adopted the ISIN as its primary identification number for financial instruments. An ISIN may be obtained from any of the National Numbering Agencies (NNAs).

The Association of Numbering Agencies (ANNA) is the overseeing registration authority of the ISIN and is “committed to the use of standard identifiers to make the financial world a more efficient, safer and more stable environment for investors and the financial institutions that serve them.”
 
ANNA are responsible for promoting the ISIN standard and developing it adoption and use in over 200 jurisdiction.

The Legal Entity Identifier (LEI Number)

​The concept of the Legal Entity Identifier (LEI) was crafted by the G20 in 2011. The need for another financial identifier arose after the fallout precipitated by the Global Financial Crisis in 2008. This time the identifier was not to be used for identifying financial instruments, but the market participants involved in financial transactions, or the “legal entities”.
 
It had always been difficult to identify individual entities, particularly if that company was international and had many branches all over the world or complex funding structures, how do you know which one is engaging in any given transaction? The global financial crisis not only highlighted this issue but it left many financial institutions in a vulnerable position as a vast number of their legal entities were indistinguishable.

An example of a legal entity which may obtain an LEI Code is a Limited Company or partnership, a fund, a trust, any company listed on a stock exchange or engaging in the transaction of securities (which may possess an ISIN) and OTC Derivatives.

Similar to ANNA, The Global Legal Entity Identifier Foundation (GLEIF) are the responsible organization for implementing the LEI and monitoring the performance of the Global LEI System.

The global LEI system provides a database of freely accessible high quality data on each legal entity participating in financial transactions globally. This makes it very easy for regulators and market participants to easily identify who is party to a transaction. It also reduces the risk of fraud and allows banks to spot money laundering activity more easily. You can cess this database using the LEI Look Up tool.
 
LEIs and ISINs have a lot in common, they are both used for increasing transparency, they are both made up of alphanumeric digits with check numbers, and are both globally recognized. The difference between LEIs and ISINs lies in their purpose.
 
Even though they are fundamentally different they serve complementary purpose. Combined, they can map out the global financial system and bring a level of security to the markets which was previously inconceivable.

ISIN-LEI Mapping Process

The process of combining ISINs and LEIs to create a powerful formula for transparency is known as ISIN to LEI Mapping.

By linking The LEIs with corresponding ISINs we connect the dots to create a visual representation of the global financial marketplace, moreover it provides security and transparency to participants and regulators.”

On the 4th of September 2018, ANNA and GLEIF launched a new initiative to begin linking ISINs with their corresponding LEIs. This means that finally tradeable financial assets (securities) can be linked to the legal entities purchasing, issuing and selling that security.

​This is widely perceived to be a huge step in aggregating the data required in order to analyze risk exposure accurately. This initiative has recently also been endorsed by the Financial Stability Board (FSB) and the European Securities and Markets Authority (ESMA).

Dan Kuhnel, Chairman at ANNA stated “We are constantly looking at ways to promote standardization and bring about harmony in the financial industry, and are delighted to work together with GLEIF to link two important ISO standards together.”

Video source: GLEIF Website

​In order run a successful mapping initiative it is of critical importance that accuracy is at the top of the priority list.

​GLEIF have established a certification process whereby organizations can use the technology top link LEIs to their corresponding ISINs.

​Specialist companies such as ISIN2LEI have begun the mapping process which makes the mapped identifiers available for download via CSV or PDF file. Customised data mappings are now available for organisations such as banks, insurance companies and pension schemes. 

Johan Hol, Founder and CEO at ISIN2LEI.eu stated;

​"ISIN to LEI mapping is mainly associated with regulatory reporting. We started mapping ourselves based on issuer and counterparty names. We highly support the open data initiatives, like the ISIN-to-LEI relationship file provided by GLEIF and ANNA, to make these mappings available to the public so they can be used by every organization in exactly the same way. ​

We now use open data as our primary source for ISIN to LEI mappings. We also map other attributes like NACE and CIC to LEIs and ISINs respectively. Although they don't fully cover all financial instruments yet, their potential is impressive.

The 60-70% they cover now improves both data quality and processing time and reduces costs for our clients as they don't have to buy the data from data vendors.
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​The remaining instruments are mapped via our search and mapping algorithms, so we can assure a 100% mapping coverage. 
We are happy that the importance of standardization and (open) data mappings is more and more acknowledged in the financial sector. ​​"

Ultimately in the future, financial institutions such as banks and regulators will be able to run identity checks in real time and may be able to cut down on the human element. In doing so the identification process is greatly enhanced as multiple ID Platforms linked can greatly reduce time and financial costs.
 
To date there have been almost 10 million ISINs linked to 64,000 LEI records. These can be viewed in GLEIFs open source ISIN-to-LEI relationship files here.
 
The benefits of ISIN to LEI mapping are numerous. This is not just an exercise in compliancy or meeting regulatory requirements such as SFTR, but by attaching an LEI to a security, finance institutions can clearly spot trends and analyse suspected money laundering activity. This also provides security to market participants as it protects against cases of attempted fraud and market abuse.

BIC-to-LEI Mapping

Since 2018, GLEIF have also being mapping BIC (SWIFT) Codes to Legal Entity Identifiers in a process known as BIC-to-LEI Mapping.
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GLEIF and SWIFT have developed a model that will allow organisations to clearly identify themselves not only with the Bank Identifier Code, but also a Legal Entity Identifier Code ensuring an extra layer of identity security and interoperability/recognition across identity platforms.

Currently having an LEI is a mandatory prerequisite for any entity seeking to apply for a SWIFT code. 

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​ANNA, GLEIF and data mapping companies such as ISIN2LEI will continue to develop and roll out the service with a view to bringing much needed transparency to the industry on a global scale.
 
If your organisation currently has an ISIN but would like to see if an LEI is available to be matched, please get in touch with us at [email protected] and we will be able to provide you with an LEI and put you in touch with the right person to link the ISIN and LEI together.

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