Indian companies benefit from the LEI

The abbreviation LEI stands for “Legal Entity Identifier”. This is one of the most important codes for global transactions with financial service providers and reliable economic trade. The LEI is permanently assigned to an individual legal entity. The 20-digit code makes it possible to clearly identify companies involved in financial transactions. The LEI data pool can be used to transparently assess the company, its legal form and its work. Below, we explain its structure and benefits in detail, but you can also check what is LEI for a quick reference.

Mandatory for financial service providers and banks

Companies such as banks, insurance companies, securities service providers and investment funds are required to maintain and report an LEI in the European Union. This obligation was introduced in response to the financial crisis that began in 2007. At the G20 summit in 2009, the member states discussed the urgent need to regulate the global financial market and provide transparent information on financial service providers. At that time, the G20 commissioned its Financial Stability Board with the implementation.

The Legal Entity Identifier is a result of precisely this process. This also means that leading industrialized countries, the World Bank and the European Central Bank are behind the concept and have helped to develop its concrete implementation. Today, the code is not just a mandatory program. It offers economic partners important security. If companies from India want to do business with German companies or initiate joint investment projects, it creates a good basis for trust. But what does the code look like? What does it mean and how do companies get their entry in the first place?

The data is collected according to this ISO standard and this template

ISO standard 17442 is used to create the LEI. What basic information is collected as a minimum? The company and its name are collected for the respective data entry. The address of the company’s current head office and the address at the time of foundation are also recorded. The date on which the LEI was first issued and any change dates are also recorded. If the entry is only valid until a certain date, the expected end of validity is indicated. In addition to a number in the applicable commercial register, the LEI code of the company is also recorded.

This code is uniquely identifiable worldwide. It has 20 digits and is alphanumeric. Basically, it is structured similarly to an IBAN. In the case of the LEI, however, it does not contain a bank sort code. But here, too, we have a clear system. The first four digits indicate the Local Operating Uni (LOU). This means that they refer to the office that assigned the code. The authorized bodies assign the codes on behalf of the Global Legal Entity Identifier Foundation (GLEIF). This means that there is also a global umbrella organization, which in this case is based in Switzerland. Positions 5 and 6 are followed by two zeros. They mark a separation to the next section. From position 7 to 18, there is then a number that is created specifically for each individual company in accordance with the ISO standard. The last two digits of the code are check digits. The code is usually valid for one year. It must then be renewed.

Various economic advantages for Indian companies

For companies from India, it is not just about having the code in their hands. It is linked to a data pool that is publicly accessible. Important information about the company, its shareholding and financial transactions can be viewed via this data pool. Anyone who wants to access the information does not have to pay any fees. Anyone can check for themselves at any time whether a business partner is actually who they claim to be. GLEIF even offers an interactive map with detailed information on its website. This information and its low-threshold accessibility are important for preventing commercial fraud and for good risk management.

The collection of data follows a standardized procedure. So when companies from India are looking for a business partner for certain tasks, they do not simply have to rely on their own description. They can use the standardized data collection to check exactly what distinguishes another company. They can quickly compare the entries of different companies in a qualified manner. And then select the business partner that suits them best. The LEI is an important tool for successful planning for management, the budget department and risk management in companies.

Trust in financial transactions – transparent information on companies

The main advantages are therefore these: Transparency and confidence in knowing who you are doing business with. There are clearly better opportunities for action in the area of due diligence and KYC processes. Advantages in the area of customer management and in the management of long-term business relationships. Disclosure of corporate relationships and constructs with subsidiaries. This has also significantly improved regulatory oversight for government bodies. The code, mapping and associated legal entity data significantly simplify some bureaucratic processes. This is an advantage for Indian companies that are reaching out to Europe for the first time and are struggling with European bureaucracy.

According to GLEIF, the LEI works towards “financial stability objectives” on the financial market. It is intended to enable transparent business relationships and provide companies with a secure data basis for their risk management. On the other hand, the procedure was also developed to establish a common basis of trust. The LEI must be renewed after one year. This ensures a regular review of the data provided. If a company does not have the code renewed or is no longer active, the LEI is listed as “inactive”. In legal terms, this status also means that investments are no longer permitted. Here, too, the legislator ensures security with its requirements for the LEI procedure.

How companies can apply for an LEI

It is not complicated for companies to obtain an LEI. The LEI can be issued by agencies that have been accredited by the GLEIF. There is a list of accredited registration bodies on the GLEIF website. Companies can simply select one of these bodies. They enter their relevant data with this registration organization. The body then checks the data for correctness. If everything is correct, it assigns the company an LEI code. The information is then forwarded to the GLEIF together with this code.

A corresponding entry is made for the company in the online data pool. The time required for LEI allocation and inclusion can vary. However, it usually does not take much time. Sometimes the entry is completed in just a few hours. However, the process should be completed within a few days. What is important for companies: They should not forget to renew the LEI before the deadline expires. Some registration organizations also remind their customers to renew in good time.

And what does the LEI cost?

The fees for applying for and renewing the LEI vary. They often range between 4000 INR and 6000 INR per year. The exact amount depends on the service provider and the services they offer. On the other hand, it also depends on whether the company buys a package that includes LEI renewals in addition to the first year. It is generally advisable to compare prices and choose the right package. If possible, companies should also choose a registration authority with which they have a short line of communication. In most cases, no time-consuming exchange is necessary. However, if there is a question, an organization from your own country is of course easier to contact.

Conclusion: LEI offers more than just a mandatory legal program!

Financial service providers from India can use the LEI to create a good basis of trust that brings them into contact with companies from other countries. Regional commercial enterprises and start-ups also clearly benefit from the LEI. Economic cooperation across national borders is often the decisive step in an important growth phase. However, for this to succeed and for both partners to know where they stand, transparency and trust are required. The LEI creates precisely this. And it offers anyone who wants to find out about the most important data from financial service providers a free and reliable insight.