A Legal Entity Identifier (or LEI), is a 20-character alpha-numeric string that is used to identify distinct legal entities that engage in financial transactions.
The LEI is a global standard (ISO 17442), designed to be non-proprietary data that is freely accessible to all.
Simply put, the publicly available LEI data pool can be regarded as a global directory, to connect key reference information that enables clear and unique identification of legal entities participating in financial transactions which greatly enhances transparency in the global marketplace.
The LEI system adoption is driven by G20 Group of Industrialised Nations, Financial Stability Board and many regulators across the world in response to the inability of financial institutions to identify organisations uniquely, so that their financial transactions in different national jurisdictions can be fully tracked.
Two fundamental principles of the LEI code are-
Uniqueness: an LEI is assigned to a unique entity. Once assigned to an entity, and even if this entity has for instance ceased to exist, a code should never be assigned to another entity
Exclusivity: a legal entity that has obtained an LEI cannot obtain another one. Entities may port the maintenance of their LEI from one operator to another. The LEI remains unchanged in the process.
The reference data stored in the LEI data base for each entity includes:
- The official name of the legal entity;
- The address of the headquarters of the legal entity;
- The address of legal formation;
- The date of the first LEI assignment;
- The date of last update of the LEI;
- The date of expiry, if applicable;
- For entities with a date of expiry, the reason for the expiry should be recorded, and if applicable, the LEI of the entity that acquired the expired entity;
- The official business registry where the foundation of the legal entity is mandated to be recorded on formation of the entity, where applicable;
- The reference in the official business registry to the registered entity, where applicable.
Structure of LEI
1-4 Characters – Identifier of Local Operating Unit (LOU) that issued the LEI.
5-6 Characters – Reserved for future use. At present denoted by ’00’.
7-18 Characters – the unique alphanumeric string assigned to the organisation by the LOU
19-20 Characters – Checksum Digits
The Global Legal Entity Identifier Foundation (GLEIF) does not directly issue LEIs but is rather responsible for monitoring the quality of LEI data.
The task of Issuing LEIs and registration service thereof is delegated by GLIEF to Local Operating Units (LOUs).
RBI Mandate in India
The Press Trust of India reported on 2 November 2017 that the RBI has mandated large corporate borrowers having exposure of Rs 5 crore and above to mandatorily obtain LEIs from banks. The purpose of the move is ostensibly stated to be aimed at improving risk management.
Time Schedule to obtain LEIs
Consequences of failure
The RBI also instructed banks that borrowers who do not obtain LEIs as per the schedule are not to be granted renewal / enhancement if credit facilities.
Legal Entity Identifier India Limited
LEIIL will act as a Local Operating Unit (LOU) for issuing globally compatible Legal Entity Identifiers (LEIs) in India.
“LEIL has been recognized by the Reserve Bank of India as an “Issuer” of Legal Entity Identifiers under the Payment and Settlement Systems Act 2007 (as amended in 2015).”
LEIL has also been Accredited by the Global Legal Entity Identifier Foundation (GLEIF) as a Local Operation Unit (LOU) for issuance and management of LEI’s.