LEI stands for Legal Entity Identifier . This is a 20 character alpha numeric code based on ISO 17442 standard. This code helps in identifying the legal entities in a payment transaction.
For example in Canada all counterparties to the derivatives transactions need to have an LEI. As faster payments and pay mod initiatives kick in, more market participants including legal companies, their subsidiaries, government departments, charities will be expected to have this code.
The LEI Common Data File Format v.2.1 is expected to record previous legal names, "operating under", "brand name", "trading as". This clarity is expected to reduce operating cost and false positives.
In future once LEIs are incorporated into the business processes substantial cost savings accrue in verifying entity during loan origination, KYC refresh, credit worthiness monitoring , compliance reporting etc.
Banks can consider using LEI as a business case to step up the ISO20022 modernization effort.
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