November 16, 2015

To the LEI Regulatory Oversight Committee
Japanese Bankers Association

Comments on “Consultation document on including dataon branches in the Global LEI System”
We, the Japanese Bankers Association, would like to express our gratitude for this opportunity
to comment on “Consultation document on including data on branches in the Global LEI
System” released on October 19, 2015 by the LEI Regulatory Oversight Committee.
We respectfully expect that the comments in attached paper will contribute to your further
discussion on this issue.

LEI ROC
Consultation Document:
Including data on branches in the Global LEI SystemAnnex: Questionnaire
Please type your answers into the attached questionnaire and send it to leiroc@bis.org by
COB 16 November 2015. Where possible, please specify the reasons for the preferences
expressed or the details of any trade-offs you see.
The responses to the questionnaire will be shared within the ROC membership and with theGLEIF. Neither participants’ identity nor any specifically identified reference to their opinion
will be made public without their express consent. However, the responses themselves may bequoted on an anonymised basis. A standard confidentiality statement in an email message will
not be treated as a request for non-disclosure.
Identification of the respondent and confidentiality
Respondent: Japanese Bankers Association
Name and email of a contact person:☐ Please check this box if you object to any of the responses below being quoted on an
anonymised basis, and specify here any sections or questions to which this objection
appliesPlease specify here as needed which response(s) should not be quoted:

1

Uses of international branch information

1.1 What regulatory or private sector uses could benefit from allowing international
branches to obtain LEIs?
We consider that private sector users will not benefit from allowing international branches
to obtain LEIs and cannot assume any needs for them to use such. This proposed approach
would only increase management costs.
To our understanding, LEIs have been discussed based on a fundamental concept that LEIs
will be granted to parties engaged in financial transactions (on a basis of legal entities
excluding natural persons).
While we can understand the ROC’s decision to limit the eligibility to international
branches in light of convenience for authorities, related to data collection and cross-bordertransactions as described in page 2 of the consultation document, assigning a separate LEI
to those international branches that are not engaged in a transaction as a legal entity
would be inconsistent with the above-mentioned original concept.

1

Besides, this proposed approach would require a considerable amount of additional costs.
Specifically, as the existence of multiple LEIs within a same legal entity differs from theoriginal concept of LEIs, a framework will need to be re-established, giving rise to asignificant increase in system development/modification efforts and costs. Further,internationally active companies may result in obtaining an LEI not only for the head office
but also for their international branches in each jurisdiction. As a result, not only the head
office but also branches will be subject to management and system-related burdens,
presumably increasing burdens and costs for the users as LEI registrant. Therefore, fromthe cost perspectives, assignment of LEIs to international branches should be avoided or atleast should be discussed and assessed with considerable care.
Even when exploring the possibility of uses by financial institutions, the use will be limited
to grouping on a jurisdiction-by-jurisdiction basis for credit management purposes because
only one LEI would be issued per jurisdiction, instead of per international branch. Given
that most of financial institutions already have in place a certain framework to manage
counterparty exposures by jurisdiction, the merit of such a use would be very limited.
Regulatory uses for resolution purposes can be understood. Nevertheless, since applicablelaws and regulations differ across jurisdictions, assignment of a separate LEI tointernational branches would provide only a limited benefit in substance. Further, theconsultation document indicates that LEIs would be issued to international branches basedon regulatory registration in each jurisdiction, which in itself demonstrates duplicatemanagement. In this view, it is considered that a new numbering system of LEIs tointernational branches is unnecessary.
Alternatively, it is considered sufficient to establish a framework whereby relevant
authorities exchange information or to introduce common numbers without involving
private sectors. Moreover, it is difficult to consider the needs to use LEIs of international
branches for resolution purposes unless there is a proof that the existing recovery andresolution planning (RRP) is incomplete for managing branches or there is an official
request from authorities for a new international numbering system related to resolutions ineach jurisdiction.
Overall, changes to the treatment of LEIs which are considered to be unnecessary for mostof private sectors are being proposed one after another, resulting in an unclear picture as awhole and of the future. Therefore, it is becoming significantly difficult to take, or evenmake business decisions on, relevant approaches including system developments; andtherefore entities are rather getting more disincentivised to work on LEIs. Further, entities
will be unable to undertake a full-fledged initiative to address LEIs and instead will have totake multiple tentative approaches, which may rather increase risks.
1.2 Are there complications that you envision from allowing international branches into theGLEIS, notably in view of possible breaches or risk of confusion with regard to theprinciple of exclusivity? If so, how would you propose to address them?
Please refer to our answer to the question 1.1.

2

2Conditions for issuing LEIs to branches

2.1 Are the conditions described in this consultation sufficiently restrictive or toorestrictive? Please explain your answer and offer alternative suggestions. Be specific about
what you would suggest adding or removing.
As described in our answer to the question 1.1, issuance of LEIs to branches should beavoided.
Assuming that it is determined to issue LEIs to branches, it should be regarded as an
exceptional treatment by setting more severe conditions, such as the international branch
can be deemed as “an entity that is completely legally separate and independent from thehead office” (e.g. the branch is treated legally separately from the head office when thehead office defaults).
2.2 Should an international branch’s head office be required to authorise that aninternational branch can obtain an LEI, prior to issuance of an LEI to the branch?
Alternatively, should the GLEIS envisage a system where the contact person(s) of theheadquarter entity, as recorded by the relevant LOU, would simply be notified that arequest by one of its international branches was made? Please explain the reasons for yourpreference.
Issuance of LEIs to branches should be avoided.
Assuming that it is determined to issue LEIs to branches, either of the approaches
mentioned in this question may result in increased system workload and costs forestablishing an LEI framework or may impose increased workload and costs on
internationally active companies. Therefore, a careful consideration would be needed.
2.3 In addition to host country business registries, could the registration in a businessregistry held in the home country also be accepted in the GLEIS as an acceptable means toprovide certainty on the existence of an international branch as a separate entity in the hostcountry, especially where the establishment of a branch involves both home and hostauthorities, for instance in the banking sector?
If LEIs are issued to branches, it would be necessary to develop an identification process as
described in the consultation document. However, it is our concern that this would increase
workload and costs as discussed in our answer to the question 2.2.
2.4 What other factors should the ROC take into consideration?
The ROC should immediately perform a cost-benefit analysis. The proposal would only
give rise to confusion and would not produce any benefits.
3

Other

3.1 Do you have any comment on the definition of international branches on page 1 of thisconsultation document?

3

Please refer to our answer to the question 2.1
We do not see how LEIs can be issued for branches; it seems to contradict the guidanceissued (e.g. by the Commodity Futures Trading Commission (CFTC)) that a branch is not a
separate legal entity. In addition, it is not clear whether the term “branch” represents abooking branch or trading branch. There are many cases in which a booking branch andtrading branch are different. Therefore, if branches are to be assigned LEIs, it would benecessary to clearly define which LEI should be used.
3.1 Do you think it should also be possible to assign an LEI to the “home activity excluding
foreign branches,” for instance to avoid that the “headquarter-LEI” be used for twocompeting purposes: (i) identifying the entire legal person (home country activity plus
foreign branches) and (ii) identifying only the home country activity? Please describe theuses or the risks you would see to such an LEI.
Currently LEI covers the entirety
Head office in home country
International branch in host country A
International branch in host country B

Q3.1 seems to imply that it would have to be all or nothing – i.e. all firm’s international
branches have their own LEI or none of them do.
This would not fit in the instance where some regulators mandate the use of the branch LEI
and others do not (if they are going to go down that inconsistency route).
Also, if in some jurisdictions the branches do not qualify as ‘international branches’ (i.e. inthe cases where they are not registered on a local business registry and therefore cannot
obtain their own LEI), the proposal is unclear as to whether the entity-level LEI should be
used for transactions conducted by branches which cannot obtain their own LEI, while thebranch LEI is used for those transactions conducted by branches granted with an LEI. It
seems there is a potential that this proposal could undermine the benefit of creating a
globally consistent LEI system.
3.2 a) Because the existence of a branch is so closely linked to its head office, can it beconsidered that the LEI of the branch LEI would necessarily expire when the head office
LEI does, or are there cases where the branch would be considered in the host jurisdiction
to survive, for instance, to a dissolution of the head office entity? b) Similarly, in case abranch has been acquired by another legal entity, should it keep its LEI and the associatedentity information be updated with the LEI of the new head office? c) If a branch isincorporated into a distinct legal person, should the LEI become inactive, be marked as a
“CORPORATE_ACTION” and a successor entity LEI mentioned, or should the entity keep
its LEI with a mere update of the legal form?
Considering whether to expire the branch LEI when the LEI of its head office does sowould mean that both the branch and its head office belong to the same legal entity. It is4

not appropriate to assign a separate LEI to such a branch in the first place.
3.3 Is there anything important at this stage related to branches that has been omitted fromthis consultation or any other comment or suggestion you would like to make?
We would like to highlight that, as mentioned previously and subsequently, there are many
practical concerns regarding the introduction of the branch LEI within the same coding
framework as the entity-level LEI. Hence, when you discuss on how to use the branch LEI,
it would be appropriate if you treat branch information separately from entity informationand implement trade reporting requirements accordingly.
Given these concerns and the fact that the purpose of this introduction, including tradereporting and supervision, seems to focus mainly on financial institutions, we would like topropose that an alternative method, adding a field of “Swift BIC Code” which is alreadyused by financial institutions, might be more practical to identify branches than assigning
an LEI to branches.
<Concerns about introduction of the branch LEI>
(1) Cost: If each branch as well as the head office is required to bear cost for issuance andrenewal of LEI, there would be a huge increase in cost in addition to the cost forsystems development.
(2) LEI management: In case the renewal dates of LEIs differ across branches, it would be
unnecessarily burdensome to manage the renewal dates of all LEIs across the entity
especially when they are issued by different LOUs. To address such a case, it would berequired to consider mandating that the issuer of the headquarter-LEI must synchronise
renewal dates of LEIs to all child branches regardless of their location.
(3) Discrepancy of reporting obligation between jurisdictions: The ROC announced that it
would not be compulsory for international branches to obtain their own LEIs but local
regulators could mandate it in relation to reporting requirements in their jurisdiction.
This discrepancy would result in unnecessary confusion and practical difficulties. In thecases where, for example, Jurisdiction A requires the branch LEI while Jurisdiction B
does not or Jurisdiction C allows both entity-level LEIs and branch-level LEIs, several
mixed LEIs for an entity and branches will be used for trade reporting. This may
undermine data aggregation by authorities and may further increase managerial
burdens of, or may confuse, entities obtaining LEIs due to coexistence of multiple LEIs.
(4) Retrospective reporting: If some jurisdiction requires branch LEIs in the tradereporting, entities may be required to re-report all previously reported transactions. If
not, it raises another issue of how the continuity of data can be ensured. Given thatsystems may not be able to manage dual reporting (e.g. old transactions still using
entity-level LEIs while new transactions using branch LEIs), as well as transaction
volumes subject to TR reporting are huge, re-reporting of transaction data
retrospectively would considerably be burdensome and complex.

Thank you for participating in this consultation.
5