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Saturday 20 January 2018

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GLEIF identifies $650m savings with LEI

Written by Chris Lemmon
18/10/2017

The Global Legal Entity Identifier Foundation (GLEIF) and McKinsey have examined the potential use cases of the Legal Entity Identifier (LEI) in streamlining verification processes, finding that its application could save entities around $650 million annually.

Across different systems and organizations, the LEI can simplify and expedite reconciliation among different systems or networks, enabling faster identity verification when using multiple data sources. It makes important information about the background of a legal entity in a transaction more accessible and traceable. For example, commercial credit providers could use the LEI to verify an entity’s ownership structure before granting credit, and banks could use them to match multiple legal documents to a client when processing a specific transaction.

The joint white paper estimated that broader, global adoption of the LEI could yield annual savings of over $150 million within the investment banking industry and up to $500 million for banks in the issuance of letters of credit. Annual savings in investment banking would include at least 10 per cent of total operational costs for onboarding clients and trading processing through the use of LEIs.

The Global LEI System assigns 20-digit alpha-numeric LEIs to uniquely identify legal entities participating in transactions across the globe. Each LEI contains information about an entity’s ownership structure and thus answers the questions ‘who is who’ and ‘who owns whom’ among market participants.

Stephan Wolf, CEO of GLEIF, commented: “We hope this paper will broaden the understanding of LEIs and spark further debate about their cost saving and efficiency benefits. The new research clearly illustrates the value of the LEI, but its broad application and adoption depends on the creation of a strong network of advocates.

“We are therefore actively encouraging organisations, especially large corporations, small businesses and their banking institutions to work together to discuss and consider the adoption of LEIs in day to day processes.”



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