4.4 Cooperative oversight on CLS and TS2

Box 7 Brief description of LEi codes and the international administrative system

The structure of the LEI code is specified by international standard ISO 17442:2012. The code is a series of 20 characters that may contain both numerical and alphabetical characters. The LEI code is structured as follows:

• Characters 1-4: identifier of the issuing Local Operating Unit (e.g. 5299)

• Characters 5-6: reserved characters set to zero (i.e. 00)

• Characters 7-18: unique reference data generated according to pre-defined policies. The reference data consisting of 12 characters include information such as the name, address, set and legal form of the entity associated with the

LEI code, and the expiry of the LEI code (e.g. MPT6BHOJRRB7)

• Characters 19-20: check digits (e.g. 46)

Using the above example, the full LEI code is 529900MPT6BHOJRRB746

Each entity may be allocated only one LEI code and the code issued will not change even in the event, for example, of changes in ownership. It is also important that LEI codes used previously but inactivated for some reason may not be issued to another entity.

in the near future, the MNB’s oversight activities will be further extended by participating in the international oversight cooperation on CLS and TS2.

A number of financial market infrastructures provide their services across several countries and thus under several jurisdictions. Their efficient and safe operations are therefore in the interest of several national authorities, as a result of which it is essential that they cooperate on the oversight of the financial market infrastructure concerned. The CLS multi-currency settlement system and the TS2 securities settlement system, both providing international services, are overseen cooperatively by the central banks of the countries concerned, and this oversight committee is chaired by the central bank of the domicile of the system. For CLS, the primary overseer is the Federal Reserve Bank of New york, and for TS2, the European Central Bank. The tools and tasks of cooperative oversight are the same as those of oversight on national financial market infrastructures. As the HUF is expected to be introduced into the CLS settlement mechanism in 2015 and KELER is to become a TS2 member in 2016, the MNB will also participate in the cooperative oversight of these systems. This will set new directions for Hungarian oversight, since the MNB has not participated in cooperative oversight so far.