All issued LEI codes are publicly available and make part of the global directory, considerably enhancing the transparency of the financial system by documenting who is who in the global financial markets. Also, each LEI reflects information about an entity’s ownership structure, unambiguously demonstrating who owns whom in each financial transaction. To ensure the quality of financial data, LEI Regulatory Oversight Committee was established as a body that registers and regularly verifies the data following strict rules and procedures making sure of its integrity, reliability, and usability.
LEI codes are issued by an approved local operating unit (LOU) since international business practices and frameworks can vastly differ across jurisdictions and local knowledge of corporate organizational frameworks, business practices, and infrastructure is critical in assigning codes that will reflect all the relevant information about business entities.
When you need to get an LEI code, LOU issuers you will need to find one of these issuers who act as the main point of contact for legal entities intending to get an LEI code. Obtaining an LEI from any local operating unit requires the payment of an initial registration fee, after which an annual maintenance fee is regularly paid. All fees are intended to cover LOU’s operating costs and a portion of those fees are shared with the nonprofit Global LEI Foundation.
Every legal entity that intends to participate in a financial transaction is eligible for an LEI. In Europe, it is a requirement for all entities who are parties to a financial transaction regardless of their origin. This means that if you are a US bank wishing to enter into securities trading on a European stock exchange, you will need to get an LEI before being allowed to trade.
Each LEI code reflects the following information about the entity it is assigned to the registered address, country of incorporation, date of lei code issuance and renewal, and date of expiration.
Although LEIs bring immense benefits in assessing the overall risk exposures across the markets, and as such their origins trace back to international initiatives of financial regulators, there is also a strong business case for the private sector to embrace these unique identifiers. The case is growing stronger with the digitization efforts that are spreading across the global business environment. In a data-driven world, having access to reliable data is paramount. Automation and efficiency gains based on it, drive ROI and competitive advantage, enabling organizations to stand above the competition. However, for automation to be possible, financial data must be available, reliable, and usable.
Used across markets and jurisdictions to uniquely identify a legal entity that engages in a financial transaction, LEI is an essential part of the global financial transaction. LEIs create value in every process that requires the identification and verification of a counterparty. They take the ambiguity out of financial transactions introducing security and reliability to ensure efficient and safe transacting across the globe. Data reported externally to supervisors and used internally for risk management purposes are more consistent and usable.