Global Legal Entity Identifier Foundation | GLEIF
The Global Legal Entity Identifier Foundation (GLEIF) is a non-profit organization that manages and administers the Legal Entity Identifier (LEI) system. The LEI is a unique identifier assigned to legal entities that engage in financial transactions, such as corporations, partnerships, and government agencies. The primary goal of GLEIF is to ensure the accuracy and integrity of LEI data while facilitating the global adoption of the LEI system.
What was the need for standardized identification in the financial system?
The Legal Entity Identifier (LEI) was created in response to the 2008 financial crisis, highlighting the importance of increased transparency and accountability in financial markets. The crisis exposed the inability of many financial institutions to accurately identify the parties involved in complex financial transactions, making it difficult to assess the risks and exposures of these transactions.
The LEI initiative is driven by the Financial Stability Board (FSB) and the finance ministers and governors of central banks represented in the Group of Twenty (G20).
Before the creation of GLEIF and the Legal Entity Identifier (LEI), the lack of a standardized and unique identifier for legal entities posed several challenges in the global financial system. Some of these challenges included:
- Difficulty in identifying legal entities involved in financial transactions: Without a universal identification system, it was difficult to identify legal entities accurately across global financial markets.
- Lack of transparency in financial transactions: The lack of uniform identification makes accurate tracking of financial transactions difficult. This contributed to a lack of transparency and made committing fraud simpler for negative actors.
- Increased systemic risk: Since regulators, investors, and other stakeholders were unable to appropriately identify and monitor systemic concerns in the absence of a uniform identifier, systemic risk escalated in the financial system.
- Inefficient data management: Financial institutions had to rely on different and fragmented data sources to identify legal organizations, which was time-consuming, expensive, and prone to errors and inconsistencies.
What is the Legal Entity Identifier?
The Legal Entity Identifier (LEI) is a 20-character alphanumeric code that provides a standardized and unique identification of legal entities that engage in financial transactions worldwide. It's designed to enhance transparency and mitigate risk in the global financial system by providing a universal identification system for legal entities.
LEI has an annual renewal policy — an essential aspect of the LEI system. The annual renewal ensures that the legal entity data associated with the LEI is accurate and up-to-date, which is crucial for the proper functioning of the LEI system. The renewal process requires the legal entity to review and confirm the accuracy of its LEI data and make any necessary updates.
If a company fails to renew its LEI, the code's status will change to "Lapsed," and the LEI will no longer be recognized as a valid and active identifier for the legal entity. This can result in disruptions in financial transactions, as other stakeholders in the financial system may be unable to identify the legal entity accurately.
Once assigned, the LEI remains with the company permanently and will not change.
Why was GLEIF created?
The Global Legal Entity Identifier Foundation (GLEIF), a non-profit corporation founded by the Financial Stability Board (FSB) in 2014, manages the LEI system. The LEI system attempts to improve financial transaction transparency, risk management, and regulatory reporting and compliance. By establishing a standardized identity for legal organizations, the LEI system enables financial market participants to track and analyze financial transactions across borders and different financial institutions more simply and accurately.
GLEIF's establishment was a collaborative effort involving regulatory bodies, financial institutions, and other stakeholders worldwide, who recognized the importance of establishing a global standard for legal entity identification. Since then, GLEIF has been working to promote the adoption of the LEI System and ensure the accuracy and quality of the LEI data.
The LEI is utilized by public authorities to assess risk, implement corrective measures, and reduce market abuse while improving the precision of financial data.
How does GLEIF operate?
Operating with a network of partners, GLEIF delivers dependable services and accessible and trustworthy data for unique legal entity identification globally. Through its services, GLEIF guarantees the operational integrity of the Global Legal Entity Identifier System (GLEIS).
GLEIF hosts the Global LEI Index, the sole global online source for open-source, standardized, high-quality legal entity reference data.
In order to maintain transparency in its service quality, GLEIF releases monthly service reports that evaluate its overall performance.
It should be noted that GLEIF does not directly issue LEI codes. Instead, the responsibility is delegated to a network of partners called Local Operating Units (LOUs), who issue LEI codes, and Registration Agents who assist clients in acquiring an LEI and guide them through the process.
- The Global Legal Entity Identifier Foundation (GLEIF) is a non-profit organization that manages and administers the Legal Entity Identifier (LEI) system.
- The LEI is a unique identifier assigned to legal entities involved in financial transactions to enhance transparency and mitigate risk in the global financial system.
- GLEIF was established by the Financial Stability Board (FSB) in 2014 to manage the LEI system and promote its adoption globally.
- GLEIF does not directly issue LEI codes; this responsibility is delegated to a network of partners called Local Operating Units (LOUs) and Registration Agents who assist clients in acquiring an LEI and guide them through the process.
- GLEIF releases monthly service reports that evaluate its overall performance to maintain transparency in its service quality.
- GLEIF hosts the Global LEI Index, the only global open source for high-quality legal entity reference data.