The Legal Entity Identifier (LEI) is a unique 20-character alphanumeric code that enables the clear and standardized identification of legal entities engaged in financial transactions. Introduced under the ISO 17442 standard and recognized globally, the LEI system promotes transparency, reduces financial risk, and strengthens market integrity.

Today, more than 200 global regulations, including those from the European Union (MiFID II, EMIR), the United States (Dodd-Frank Act), and India (RBI, SEBI guidelines), mandate the use of LEIs for specific market participants.

But who exactly is required to obtain an LEI?

Why an LEI is Necessary

The LEI system was developed following the 2008 global financial crisis, when regulators faced difficulties in identifying counterparties and ownership structures in complex transactions.

The LEI addresses these challenges by:

Ensuring transparency – Standardized global identification of entities.

Strengthening compliance – Supporting KYC (Know Your Customer) and AML (Anti-Money Laundering) processes.

Reducing systemic risk – Improving the monitoring of financial transactions.

Enhancing efficiency – Streamlining regulatory reporting and market operations.

According to industry research, widespread LEI adoption could save the global banking sector billions annually in compliance and onboarding costs.

Entities That Require an LEI

1. Financial Institutions

Banks, non-banking financial companies (NBFCs), credit unions, and insurance firms.

Required for regulatory reporting, lending, and cross-border transactions.

2. Capital Market Participants

Companies involved in securities, derivatives, and commodities trading.

Investment funds, mutual funds, pension funds, and hedge funds.

Listed companies and their subsidiaries.

3. Regulated Corporates

Entities issuing debt instruments, corporate bonds, or participating in structured finance.

Large corporates engaging in international trade and foreign investments.

4. Trusts and Special Purpose Vehicles (SPVs)

Trusts, holding companies, and SPVs used in structured finance or asset management.

5. India-Specific Requirements

The Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) mandate LEI registration for:

Borrowers with significant credit exposure.

Participants in OTC derivatives markets.

Entities listed on Indian stock exchanges.

Corporates issuing securities or debt instruments.

In India and globally, the rule is clear: “No LEI, No Trade.”

Eligibility for an LEI

Any entity recognized as a distinct legal entity can apply for an LEI, including:

Private and Public Limited Companies

LLPs (Limited Liability Partnerships)

Charitable Trusts and Associations

Government bodies and public sector organizations

Benefits of Obtaining an LEI

Global Recognition – Accepted across markets and jurisdictions.

Enhanced Trust – Facilitates verification by regulators, banks, and counterparties.

Regulatory Compliance – Meets mandatory reporting requirements.

Efficient Operations – Simplifies KYC, AML, and onboarding processes.

Transparency – Provides clarity on ownership and structure.

Conclusion

The Legal Entity Identifier is more than a compliance requirement—it is a strategic necessity for organizations engaging in today’s interconnected financial ecosystem. Whether you are a multinational corporation, a regulated financial institution, or an Indian business accessing capital markets, the LEI ensures credibility, transparency, and seamless participation in global trade.

Entities that are yet to obtain an LEI should act promptly to remain compliant, avoid disruptions, and strengthen their position in global markets.