Why is an LEI code required?
A Legal Entity Identifier number or code is required to ensure a more transparent financial market. The initiative was created after the 2008 Global Financial Crisis to avoid future global economic shocks of that severity. The LEI code is now essential for legal entities operating within today’s financial system. A company’s LEI record will contain public information accessible through a global database.
Why was LEI created?
The Global LEI System (GLEIS) was developed by the G20 in 2011 in response to the 2008 Global Financial Crisis. This crisis made the need for a more transparent financial system evident.
The Legal Entity Identifier (LEI) is a unique number, otherwise called a code, that allows the identification of any organization or legal entity on a worldwide database. The LEI code is a combination of 20 letters and numbers.
Just like us citizens have some form of a national identification number, your business should now have a global identification code as well.
What is the purpose of LEI?
The purpose of the LEI is, therefore, simple: it helps you to recognize legal entities on a globally accessible database. This results in more security around international transactions, shortcuts to Know Your Customer (KYC) processes, and boosting transparency throughout the global financial system.
A company’s LEI record contains public data such as its name, address, registered address, and whether it is a branch or owned by another parent company. The LEI Register India’s search tool allows you to access the database.
What happens if I don’t renew my LEI?
The LEI is an ISO standard primarily required for any legal entity undertaking financial transactions or operating within today’s financial system, especially within the US, UK, or EU.
Borrowers who do not obtain LEI codes from an authorized Local Operating Unit (LOU) will not be approved for any new exposure or granted renewal or enhancement of any existing exposure. However, this provision does not apply to Departments or Agencies of Central and State Governments (excluding Public Sector Undertakings registered under the Companies Act or established as Corporations under the relevant statute).
For more details, refer to the Legal Entity Identifier (LEI) for Borrowers RBI/2022-23/34.
The statement “no LEI, no trade” speaks for itself. Without an LEI code, your trades will be blocked.
Financial institutions such as brokerages, banks, investment and insurance companies, and credit unions are the legal entities that most certainly require an LEI. At this point, individuals are not required to have one.
Having an LEI ensures your business complies with the 184 international regulations mandating the use of a Legal Entity Identifier worldwide. That alone will help streamline onboarding with different financial institutions.
Find out more information about who needs an LEI here.
How to obtain an LEI?
After forming the G20 concept, the Financial Stability Board (FSB) appointed a new not-for-profit organization, The Global Legal Entity Identifier Foundation (GLEIF), to oversee it. The foundation doesn’t issue the codes but leaves them to a network of public and private companies acting as Local Operating Units (LOUs). Furthermore, you’ll need to reach an LEI Registration Agent to obtain an LEI code.
Our role is to provide you with information about LEIs, process data, and manage communication between LOUs and legal entities. We understand the value of your time and have worked hard to become the fastest LEI service provider.
Key takeaways
- The Global LEI System was created as a reliable information source, providing unique identifiers for all entities undertaking worldwide financial transactions.
- An LEI code can be obtained through an official LEI Registration Agent.
- The LEI public database is free and provides authenticated information about your counterparts.
- “No LEI, No trade.”
