A new report from the Financial Stability Board sets out recommendations for the creation of a system to ensure that the participants in a financial transaction can be properly identified.

The FSB report, released Friday, sets out 35 recommendations for the development and implementation of a global legal entity identifier (LEI) system, which would uniquely identify counterparties to financial transactions and provide reference data on them (such as the name, address, and basic ownership information).

The need to be able to properly identify the parties involved in particular transactions became acutely evident during the financial crisis, as numerous large financial institutions faltered, and regulators and the industry scrambled to figure out their counterparty exposures.

“The FSB strongly supports the implementation of a global legal entity identifier system that uniquely identifies counterparties to financial transactions. This system would be a ‘building block’ for many financial stability and regulatory objectives, and it would deliver substantial benefits to financial firms,” said FSB chairman, Mark Carney.

The report recommends a three-tier structure for the global LEI system, comprised of: a Regulatory Oversight Committee, which would have the ultimate responsibility for the governance of the global LEI system; a Central Operating Unit, a non-profit entity that would have responsibility for ensuring the application of uniform global operational standards and protocols; and, Local Operating Units to implement the global system, by offering local registration, validation, and maintenance of reference data, which would also facilitate the use of local languages and organization types.

Assuming that the G20 endorses the report’s recommendations, an FSB LEI Implementation Group aims to start the necessary preparatory work to develop a central platform to facilitate the integration of local identification schemes into a centralized database of unique LEIs. The recommended implementation plan is targeting the launch of the global LEI system by March 2013.