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A Legal Entity Identifier (or LEI) is a 20-character "identifier that identifies distinct "legal entities that engage in financial transactions. It is defined by ISO 17442.[1] Natural persons are not required to have an LEI; they’re eligible to have one issued, however, but only if they act in an independent business capacity.[2] The LEI is a global standard, designed to be "non-proprietary data that is freely accessible to all.[3] As of October 2017, over 630,000 legal entities from more than 195 countries have now been issued with LEIs.[4]

Contents

History[edit]

At the time of the 2008 financial crisis, a single identification code unique to each financial institution was insufficient worldwide. It means that each country had different code systems to recognize the counterpart corporation of financial transactions. Accordingly, it was impossible to identify the transaction details of individual corporations, identify the counterpart of financial transactions, and calculate the total risk amount. This resulted in difficulties in estimating individual corporations's amount of the risk exposure, analyzing risks across the market, and resolving the failing financial institutions. This is one of the factors that made it difficult for the early evolution of the financial crisis. The LEI system was developed by the 2011 "G20,[5] in response to these inability of financial institutions to identify organisations uniquely, so that their financial transactions in different national jurisdictions can be fully tracked.[6] Currently, the "ROC(Regulatory Oversight Committee), a coalition of financial regulators and central banks across the country, is encouraging the expansion of the LEI. Currently, the U.S. and European countries require corporations to use the legal entity identifier when reporting the details of transactions with over-the-counter derivatives to financial authorities. The first LEIs were issued in December 2012.[7]

Code structure[edit]

Structure of LEI codes
1 2 3 4 5 6 7 8 9 ... 18 19 20
LOU-
Code
Res-
erved
Entity-
Identification
Check-
sum
"G.E. Financing GmbH
5493 00 84UKLVMY22DS 16
"Jaguar Land Rover Ltd
2138 00 WSGIIZCXF1P5 72
"British Broadcasting Corporation
5493 00 0IBP32UQZ0KL 24

The technical specification for LEI is "ISO 17442.[6] An LEI consists of a 20-character "alphanumeric string, with the first 4 characters identifying the Local Operating Unit (LOU) that issued the LEI. Characters 5 and 6 are reserved as '00'. Characters 7-18 are the unique alphanumeric string assigned to the organisation by the LOU. The final 2 characters are "checksum digits.[8]

Operating System[edit]

G-20
FSB(Financial Stability Board)
LEI ROC
GLEIF

- Board of Directions

LOU 1, LOU 2, LOU 3 ...

Need of LEI[edit]

Both corporations and funds involved in financial transactions need the LEI. LEI is an identification code designed to recognize all of the entities and funds involved in financial transactions worldwide.Therefore, all corporations and funds that participate in financial transactions should be issued LEI.

In the United States and Europe, the parties to the transactions must use the LEI to report to the supervisory authorities any out-of-books derivatives transactions. Recently, it has expanded their coverage such as alternative investments, fund investments, insurance, spot markets, pensions, logistics and bids.

Obtaining a Legal Entity Identifier (LEI)[edit]

The Global Legal Entity Identifier Foundation (GLEIF) is not directly issuing Legal Entity Identifiers, but instead it delegates this responsibility to Local Operating Units (LOUs). These LEI issuers supply different services. Local Operating Units can have different prices for the registration services they offer. GLEIF is responsible for monitoring LEI data quality.[9]

Advantages of LEI[edit]

See also[edit]

References[edit]

  1. ^ "The Legal Entity Identifier Regulatory Oversight Committee". LEI ROC. Retrieved 26 May 2016. 
  2. ^ "Statement on INDIVIDUALS ACTING IN A BUSINESS CAPACITY" (PDF). LEI ROC. Retrieved 15 December 2017. 
  3. ^ "What is an LEI?". GLEIF. Retrieved 26 May 2016. 
  4. ^ "Open LEIs homepage". Open LEIs. Retrieved 26 May 2016. 
  5. ^ "What is the LEI system?". Open LEIs. Retrieved 26 May 2016. 
  6. ^ a b "The Legal Entity Identifier (LEI) Is Good News for Financial Technology Developers". Data.gov. Retrieved 26 May 2016. 
  7. ^ "Legal Entity Identifier Resource Center". Sifma. Retrieved 26 May 2016. 
  8. ^ "The Structure of the LEI Code". GLEIF. Retrieved 26 May 2016. 
  9. ^ GLEIF. "How to Get an LEI: Find LEI Issuing Organizations – About LEI – GLEIF". www.gleif.org. Retrieved 2017-10-18. 

External links[edit]


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