What is the importance of an LEI number in the financial sector?

The LEI (Legal Entity Identifier) number is used in the global financial sector to identify legal entities that have intentions to carry out financial transactions. It is based on a twenty-digit alphanumeric code standardized according to the ISO 17442 standard. All LEI numbers are stored in a worldwide database of the Global LEI System (GLEIS) and can be viewed by anyone.

Banks and financial institutions use LEIs to establish the identity of legal entities that intend to acquire or dispose of shares, bonds, swaps or other financial instruments. These legal entities may be corporations, funds, or trusts. The information stored in the GLEIS for an LEI is used to provide risk managers or the relevant supervisory authorities with insight into the corporate structures of the legal entities involved in the transaction. This is intended to increase transparency in the financial markets.

To facilitate risk management in complex transactions, the use of an LEI number is required in over 116 different regulations. LEIs are recognized by the G20 countries and have binding significance for regulations such as MiFID II / MiFIR, EMIR, SFTR, the Dodd-Frank Act and numerous other financial regulations.

How are LEI numbers used by banks?

Banks use LEI numbers in a variety of ways, but primarily in the following scenarios:

• To comply with regulations for transactions within their own group of legal entities.
• To accompany their clients when doing business in the global marketplace and ensure that the relevant regulations are met.
• To optimize KYC/AML processes.