An Introduction To LEI Numbers

The goal of Legal Entity Identifier (LEI) is to identify transactional parties in monetary institutions and define a legal entity on a worldwide scale, such as a corporation, organization, firm, government entity, trust, fund, etc. The Legal Entity Number can then be used to identify a Legal Entity in banking services and other scenarios that require verified organization IDs. Each LEI number is unique, however, and the searchable LEI database holds important info for each entity.

Why should you utilize the LEI code?

With the insolvency of Lehmann Bros and the stock markets in 2008, the demand for such an identity arose. Due to inadequate regulatory standards around securities trading, identity management, and a lack of standardized reporting systems, the world felt the effects of the crash, which, to put it bluntly, resulted in a devastating mess. The LEI system is an attempt to increase transparency and reduce the risk of capital market abuse.

What is the cost of the LEI?

The cost of an LEI number or code varies depending on the service provider. The cost of an LEI is determined by the organization's pricing structure, not by a more functional LEI code. LEI is merely a tool for identifying legal entities to provide a more complete picture of global financial transactions and gain a better understanding of financial counterparty identification, transparency, and risk exposure. As a result, while registering an LEI code, it is recommended to focus on the LEI price as the most important consideration.

How can I tell if an LEI code is active or lapsed?

You can check the current state of an LEI code using the complimentary LEI Search program, which links to the GLEIS database to verify active status, and the application system will then aid you in renewing or applying for a new code according to the status. If your LEI has expired, don't worry; the application team's validation authority can assist you in reinstating your LEI status as soon as possible.

The Legal Entity Identifier Format

The identifier is represented by characters 1-4. This indicates the source from which the LEI was generated. It permits data users to trace their data back to the LEI if ownership needs to be validated. The reserved digits of the LEI are characters 5 and 6. They are always 0,0. Every Legal Entity's LEI number has a unique set of characters from 7 to 18. Every registered trader on the Global database can be identified using the alphanumeric portion of the LEI number. Every LEI index entity will have a unique code ranging from 7 to 18 digits in its LEI. The final two digits, 19-20, are used to check whether the legal entity number is consistent with the ISO 17442 standard and are generally used for verification purposes.

Conclusion

To manage counterparty risk, the LEI code is meant to facilitate the identification and linkage of parties to financial transactions. The goal is to increase systemic risk measurement and monitoring while also supporting more cost-effective regulatory reporting compliance.