Legal Entity Identifier (LEI)
LEI is a 20-digit unique code which is assigned to different legal entities engaged in financial transactions. Same is defined by ISO 17442. It’s mandatory for any legal entity in India having fund - based or non-fund based borrowing limits greater than or equal to 5cr. Which covers Public Limited Companies, Private Limited Companies, Trusts, Partnership Firms, LLP’s, NBFC’s and Proprietorships.
Why is a Legal Entity Identifier required for my organization?
The Legal Entity Identifier (LEI) is a global reference number that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction. LEIL will assign LEIs to any legal identity including but not limited to all intermediary institutions, banks, mutual funds, partnership companies, trusts, holdings, special purpose vehicles, asset management companies and all other institutions being parties to financial transactions. LEI will be assigned on application from the legal entity and after due validation of data. For the organization, LEI will
- Serve as a proof of identity for a financial entity
- Help to abide by regulatory requirements
- Facilitate transaction reporting to Trade Repositories
What is the LEI code?
The structure of the global LEI is determined in detail by ISO Standard 17442 and takes into account Financial Stability Board (FSB) stipulations. The Legal Entity Identifier (LEI) code has been conceived of as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. The LEI is a 20-character unique identity code assigned to entities who are parties to a financial transaction. Globally, use of LEI has expanded beyond derivative reporting and it is being used in areas relating to banking, securities market, credit rating, market supervision, etc.(https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei). The LEI system has been implemented in a phased manner for participants (other than individuals) in the over-the- counter markets for rupee interest rate derivatives, foreign currency derivatives and credit derivatives in India in terms of RBI circular FMRD.FMID No. 14/11.01.007/2016-17 dated June 1, 2017 and for large corporate borrowers of banks in terms of RBI Circular DBR.No.BP.BC.92/21.04.048/2017-18 dated November 2, 2017.
Validity
Each LEID is valid for one year from the date of issuance/date of renewal. It is the duty of an entity to have their LEI’s in active status. In case of LEI status changing from Active to Lapsed status, banks may refrain from covering/offering services of OTC derivative products.