Increase Trust and Transparency with an LEI for Improved Operation Efficiencies while Cutting Cost
10/05/2021, Los Angeles, CA // PRODIGY: Feature Story //
Since the collapse of Lehman Brothers, the financial industry faced serious challenges as the financial crisis made it difficult for regulators and private-sector firms to monitor and manage the extent of market participants’ exposure to the crisis and how vast was the number of participants connected. The financial crisis underscored the need for a global standard for enhanced management of the financial connections so that industry stakeholders and regulators could have a better understanding of the nature of risk exposure at the global consolidated level and improve the availability of information across legal entities and supervisors for their efficient operations. This led regulators and industry stakeholders to work together and establish the Global Legal Entity Identifier (LEI) system with the aim of responding to the needs of these vulnerabilities and improve transparency in the financial data systems.
What is LEI?
An LEI is a unique ID of a 20-character, alpha-numeric code associated with a single legal entity that engages in financial transactions. The assigned LEI code is entered into a public distribution database that enables the consistent identification of parties involved in financial transactions in an integrated manner. The database is a comprehensive source of entity reference data that keeps expanding and enriching itself, making enhanced data available to financial institutions instantly and precisely. The global standard adopted for LEI is in keeping with the 2020 specifications of the ISO.
The LEI is designed to be adopted globally, the first of its kind to act as a unique entity identifier for business entities. The LEI information helps regulators to analyze the available data as part of internal risk management to closely keep track of stability and threats to the financial system in a consistent and usable way.
Presently, it’s mandatory to have LEI for transactions involving interest rates, credit derivatives, and forex markets. As per RBI regulations, companies and organizations in India with a total credit of over Rs 50 crore (fund-based and non-fund-based) are required to have a Legal entity identifier (LEI).
Companies too will benefit from improved management of the operational risks while reducing costs as there will be no need to spend in collecting, cleaning, aggregating data, and providing these data to regulators. Banks and credit providers will benefit as well from LEI as they will be better equipped to keep track of the exposure of borrowers. The data will also be helpful to banks to stop providing multiple loans taken against the same collateral.
The Application Process for LEI
To apply for a legal entity identifier, a business entity has to follow the following 3 steps:
- Visit https://www.legalentityidentifier.in/
- Fill in the required fields in the LEI registration form.
- Once filled, submit your LEI form and pay through any online mode of money transfer like Net banking Credit Card, Razor Pay, or Bank Transfer.
Your data will be sent for validation once you have made the payment. If the data is found okay, your legal entity identifier will be generated and sent to you by email in a few hours time (on weekdays).
Presently, different methods are adopted across various markets and countries to identify legal entities. Once the Global LEI System (GLEIS) is adopted universally as one standard system across the financial market participants, only then the full potential of the system will be reached.
Contact Name: Rahul Jha
Company: LEI Registerc
Contact Number: 1800-120-3505
Release ID: 39792