TL;DR
The Legal Entity Identifier (LEI) is a globally standardized, 20-character alpha-numeric code that uniquely identifies legal entities participating in financial transactions. Born out of the 2008 financial crisis and governed by the Global LEI System (GLEIS), it provides two tiers of reference data — who an entity is and who owns it. With over 2 million active LEIs issued across more than 225 countries, adoption is mandatory in major markets including the US, EU, and UK. Beyond regulatory compliance, the LEI reduces operational costs, streamlines reporting, and could save the financial sector up to $10 billion through universal adoption.
What is LEI?
The LEI, legal entity identifier, is a unique alpha-numeric string that operates as a reference code for legal entities involved in a financial transaction. This operates as a method of providing a global identifier for each particular legal entity to ensure transparency during financial transactions.
A global LEI system was called for and driven by the Group of 20 (G20) and the Financial Stability Board (FSB) after the stock market crash in 2008. There are currently over 2 million active LEIs across the globe.
The LEI is the first unique global legal entity identifier. It allows financial companies, regulators, and risk managers to immediately see exactly who is on the other side of a financial transaction.
The LEI is an alpha-numeric code of 20 characters, based on the ISO 17442 standard. It is an identification number that provides key information about who owns whom and who is who in a financial transaction.
Why is LEI used?
The financial crisis of 2008 really drove home the need for a global system to help with identifying and linking financial data to specific legal entities. Without this ability, it is difficult for financial firms to determine the extent of their exposure during a failure.
Financial institutions, along with their regulators and policymakers, are better able to track connections across the financial system and therefore identify potential exposures using the LEI. It works to precisely and quickly identify all parties on the other side of a financial transaction.
Legal entities that use an LEI can include the following:
- Banks
- Investment companies
- Lenders
- Financial intermediaries
- Entities listed on a stock exchange
- Commodities traders
- Insurance companies
- Brokerages
- Credit unions
Individuals cannot be issued an LEI number.
How does LEI work?
An LEI is a 20-digit alpha-numeric reference code meeting the 2020 ISO specifications outlined in the ISO 17442-1:2020. The LEI is assigned to each specific legal entity by a local operating unit (LOU) after the entity pays an initial registration fee and continues to pay an annual maintenance fee. Part of these fees goes to the central operating unit — the Global Legal Entity Identifier Foundation (GLEIF).
How is an LEI code structured?
An LEI contains several different parts.
| Digit Position | Purpose |
|---|---|
| 1–4 | Identifies the issuer (Local Operating Unit / LOU) |
| 5–6 | Reserved — always set to 0 |
| 7–18 | Unique identifier for the legal entity |
| 19–20 | Check digits for verification (per ISO 17442) |
The LEI provides reference information on the legal entity it represents in two tiered levels.
What does Level 1 reference data include?
Level 1 information contains the "who is who" data, such as this:
| Level | Data Type | Information Included |
|---|---|---|
| Level 1 | "Who is who" | Legal name, legal jurisdiction, entity status, registration authority, LEI registration date |
| Level 2 | "Who owns whom" | Parental relationships in corporate structures, outline of parent companies and subsidiaries |
What does Level 2 reference data include?
Level 2 information contains the "who owns whom" data, which includes parental relationships in corporate structures and an outline of parent companies and subsidiaries.
LEIs are renewed annually, and this involves again validating the data of the entity to ensure it remains up to date.
What is the future of LEI in the global marketplace?
Currently, LEIs are mandatory in the United States (US), European Union (EU), United Kingdom (UK), Canada, Australia, and several other countries. Many other markets and financial institutions around the world adopt and voluntarily use LEIs as well.
Financial institutions often operate internationally, and many times legal entities are required to have an LEI, or they are prevented from trading. LEI is a global identifier, and its reach is expanding. As of August 2021, LEIs had been issued to entities in more than 225 countries and territories.
The goal of the Office of Financial Research (OFR) is to continue to expand the use of LEIs to promote a truly unified and global system. This increases financial transparency and allows for more oversight and easier reporting procedures.
How is the global LEI system governed?
The global LEI governing structure and worldwide framework, the Global LEI System (GLEIS), is made up of the Regulatory Oversight Committee (ROC), the GLEIF, and LEI issuers — the LOUs.
What are the benefits of adopting the LEI?
Large international banks can often have more than one legal entity that performs financial transactions, and each of these entities will have an LEI. By adopting the LEI, the structure and connections of legal entities engaging in financial transactions are more transparent. This enhances risk management for entities and offers better insight into the global marketplace.
Adopting the LEI can also be more cost-effective for entities by lowering data reconciliation and transaction failures and reducing regulatory reporting costs. The LEI can simplify and streamline operations by helping financial companies be more efficient at the following:
- Data collection
- Internal reporting
- Risk management
- Data maintenance
The LEI also reduces overlap and duplication that occur with multiple identifiers. Therefore, it can also simplify regulatory reporting and bring more efficiency to reporting entities. The financial sector could potentially stand to save between $300 million and $10 billion, as estimated by industry standards, with the universal adoption of the global LEI system.
Where can I find more information about LEI?
In a partnership between private and public institutions, the legal entity identifier system is always expanding in hopes of complete and universal adoption. Some LEI resources include the following:
- LEI Issuing Organization: You can use this to find an LOU near you.
- Find an LEI: Use this to search for active LEIs.
- Global Legal Entity Identifier Index: This acts as a central repository that provides information on both current and historical reference data on LEI records.
- Find a Legal Entity Identifier: This offers an LEI search in a financial company reference database.
Okta works within the financial services industry to provide identity and access management solutions while supporting the adoption of LEIs by legal entities. It can also help to secure APIs, such as the GLEIF API, to do a more thorough search for LEIs to delve deeper into corporate structures.
Frequently asked questions
Who is required to have a Legal Entity Identifier (LEI)?
Any legal entity participating in financial transactions may need an LEI, including banks, investment companies, lenders, insurance companies, brokerages, credit unions, commodities traders, and entities listed on a stock exchange. In markets such as the US, EU, UK, Canada, and Australia, holding an LEI is mandatory. Individuals cannot be issued an LEI.
How do you obtain a Legal Entity Identifier (LEI)?
An LEI is assigned by a Local Operating Unit (LOU) — an accredited issuing organization. The legal entity pays an initial registration fee and an annual maintenance fee to receive and maintain its LEI. Part of these fees supports the Global Legal Entity Identifier Foundation (GLEIF), the central governing body.
What information is encoded in a Legal Entity Identifier (LEI)?
An LEI contains two levels of reference data. Level 1 covers 'who is who' — including the entity's legal name, jurisdiction, status, registration authority, and LEI registration date. Level 2 covers 'who owns whom' — detailing parental relationships, parent companies, and subsidiaries within corporate structures.
How often does a Legal Entity Identifier (LEI) need to be renewed?
LEIs are renewed on an annual basis. Renewal involves re-validating the entity's reference data to confirm it remains accurate and up to date.
What are the financial benefits of universal Legal Entity Identifier (LEI) adoption?
Universal adoption of the global LEI system is estimated by industry standards to save the financial sector between $300 million and $10 billion. These savings come from reduced data reconciliation costs, fewer transaction failures, lower regulatory reporting expenses, and the elimination of duplicate identifiers across systems.
How many Legal Entity Identifiers (LEIs) are currently active worldwide?
There are currently over 2 million active LEIs issued to entities across more than 225 countries and territories, reflecting the system's broad and growing global reach.
References
ISO 17442-1:2020. (August 2020). ISO.
FSB Financial Stability Board. (2022). FSB.
LEI Statistics. (2022). Global Legal Entity Identifier Foundation (GLEIF).
LEI. (2022). Global Legal Entity Identifier Foundation (GLEIF).
Legal Entity Identifier. Office of Financial Research (OFR).
Global LEI System. ROC.
Legal Entity Identifier – Frequently Asked Questions. Office of Financial Research (OFR).
Get an LEI: Find LEI Issuing Organizations. (2022). Global Legal Entity Identifier Foundation (GLEIF).
LEI Search 2.0. (2022). Global Legal Entity Identifier Foundation (GLEIF).
Global LEI Index. (2022). Global Legal Entity Identifier Foundation (GLEIF).
Find a Legal Entity Identifier. Office of Financial Research (OFR).
Identity and Access Management for Financial Services. (2022). Okta.
GLEIF API. (2022). Global Legal Entity Identifier Foundation (GLEIF).
