Legal entity identifiers (LEIs) are a unique 20-digit code given to legal entities who engage in financial transactions. Global LEI System is a systematic multinational effort to develop a unified system for the global distribution and maintenance of LEIs by financial regulatory authorities. Leiservice.com allows your organisation to engage in global financial transactions with ease. 

The Need For LEI

According to financial regulators, lack of a consistent, accurate, and broad method for identifying parties to financial transactions led to a variety of concerns.

For example, a financial institution may use a variety of names, acronyms, or characters to designate its counterparty in a trade. Those computer algorithms might interpret the lack of a unique identifier as a reference to various legal organizations. A global system for allocating such identities results in a number of commercial and public advantages, according to banking regulators.

Benefits

Private: Internal data verification and consolidation is simplified, saving financial organizations money on “data cleansing” and custom IT systems. As a result, the advantages to the private sector are centered on the reduction of costs and increases in productivity that results from a globalized system.

Public: It would increase the quality of financial records and thus enhance the evaluation of micro and macroeconomic risk, the simplification of organized settlement and the discovery or mitigation of fraudulent activity. Economic security is therefore the emphasis of the public benefits.

Background

The financial crisis of 2008-2009 provided a substantial incentive for the establishment of a Global LEI System, as financial authorities came to the realization that it is a critical component of financial stability. In the words of the Financial Stability Board (FSB), such a system is a social benefit. According to a letter from the agency tasked with overseeing the Global LEI System, its adoption offers “widespread benefits” to businesses around the world. The public benefits were clearly stated in this letter.

Data Quality Improvements for Business Organizations

System faults are caused by bad data, and cleaning it up can be extremely expensive. It’s a fantasy world where every piece of data is recorded properly and constantly updated. Unfortunately, we don’t live in a world where company databases are always updated and correct.

Global Legal Entity Identifier data is linked to the identifier data. In order to ensure that all LEI entries are formatted identically, LEI issuers adhere to a standard framework. New connections, addresses, phone numbers, etc. are added to the database each year because LEIs must be validated every year.

Better risk management

These systems are particularly important because they act as “building blocks” for a number of financial stability goals, including better risk management in firms and better assessments of micro and macro prudential risks, the ease with which financial institutions can be resolved in an organized fashion, the limitation on predatory pricing and reduction in the prevalence of fraudulent activity as well as a general improvement in the quality of financial data. There is no requirement for custom systems to verify organizations’ identification and allow pooling of risk profiles, therefore eliminate unnecessary risks within companies