ESMA provides 12 month extension on LEIs for non-EU counterparties under SFTR

The LEI requirement has an impact on the counterparties to an SFT that are legal entities, on all issuers of securities which are lent, borrowed or provided as collateral in an SFT as well as on other entities which, in various capacities, participate in an SFT.

Considering the still unsatisfactory level of LEI coverage on the global scale, ESMA acknowledges the potential reporting implementation issue with respect to SFTs entered into by EU investors with regards to third-country securities. In this respect, ESMA expects competent authorities not to prioritise their supervisory actions in relation to reporting of LEIs of third-country issuers, in order to ensure the smooth introduction of the SFTR reporting regime.

In that context, and to support the smooth introduction of the LEI requirements under the SFTR reporting regime, ESMA will allow for a period of up to twelve months starting from the entry into force of SFTR reporting requirements during which the reports without the LEI of third-country issuers (that do not have an LEI) of securities which are lent, borrowed or provided as collateral in an SFT will be accepted.

During this period ESMA would expect that the counterparties, as well as the other entities that participate in SFTs, such as agent lenders and tri-party agents, that lend, borrow or use as collateral securities issued by third-country entities that do not have an LEI, to liaise with those issuers to ensure that they are aware of the requirements under SFTR and are able to further facilitate the use of their securities by the counterparties subject to SFTR reporting requirements.

The partial relaxation of the validation rules only applies to the LEI of third-country issuers. It does not affect in any way the mandatory nature of reporting the LEI in all other cases where it is prescribed by the regulation, including the identification of third-country entities that take part in the SFT.

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