LEI Codes in Banking
The LEI code, known as the Legal Entity Identifier, is a 20-digit reference code that plays a crucial role in global markets by identifying legal entities involved in financial transactions. Each LEI is unique and corresponds to a Legal Entity Reference Data record in the Global LEI System database, an online resource containing information about over 2 million organizations.
Banks, brokers, and financial institutions worldwide rely on LEIs when buying or selling stocks, bonds, swaps, or other financial instruments. LEIs help them verify the identities of the legal entities involved in the transactions, which can include companies, funds, or trusts. Additionally, LEI reference data provides insights into the company structures of these entities, enabling risk managers and regulators to identify when transactions occur between parent and subsidiary entities.
The importance of LEIs is emphasized by the fact that more than 116 regulations mandate their use. These regulations aim to manage the risks associated with complex transactions in the post-2008 financial landscape. The G20 has endorsed the LEI, envisioning it as “the one identity behind every business.” LEI Codes are mandatory for complying with regulations such as MiFID II / MiFIR, EMIR, SFTR, Dodd-Frank Act, and various other financial regulations.
Renowned banks like LHV, Swedbank, SEB, Nordea, Santander, ING Bank, JP Morgan Chase, etc. use LEIs in their professional work on a daily basis.
Banks utilize LEI Codes primarily in three key use cases:
- To comply with regulations when conducting transactions within their own group of legal entities.
- To assist their clients in complying with regulations when engaging in transactions on global markets.
- To streamline Know Your Customer (KYC) and Anti-Money Laundering (AML) processes.
LEIpapa offers NFT LEI, a solution designed to help banks and other financial market participants verify relevant information about legal entities using the information stored on the decentralized network and available at LEIpapa NFT Platform. For LEIs to be effectively utilized in KYC processes, the solution must be reliable, scalable, frictionless, and cost-effective. LEIpapa addresses these requirements by assisting in the issuance of LEI Codes and simplifying the storage and discovery of LEIs for banking clients.
