Top 10 Reasons why LEI search is important

21 Dec Top 10 Reasons why LEI search is important

Legal Entity Identifier or LEI, the 20-digit, alphanumeric code that connects to the main reference information that enables unique identification of companies participating in global financial markets, is now slowly but steadily gaining importance and is being recognized as a standard. Especially after the European Union requires all the global companies that trade with European counterparties irrespective of their location need to mandatorily have an LEI in order to comply with trade reporting requirements.

Given the current global market, digitalization increased digital transactions and in return rise in fraudulence and cyber crimes has made it more important for us to have a proper system or a global watchdog in place.

Importance of LEI Search

Here are the top ten reasons why LEI search is important :

1. Risk Evaluation

Implementation of the LEI has increased the ability of authorities to evaluate risks, conduct market scrutiny and take remedial actions. In financial transactions, you can measure the total risk of the other party and also determine the risk of an individual trading partner’s concentration. A global LEI search reduces the amount of risk you are vulnerable to as you already know what you are heading into and where you are investing.

2. Business Benefits

Using an  LEI  generates substantial benefits for businesses. An LEI and henceforth using an authentic LEI search engine to find the same reduce counterparty risks and increase operational efficiency.

3. Time Saver

Using an LEI and having a one-stop search engine that will give the interested parties and investors all the required details in a format that is easy to understand and consume reduces a lot of time which would have otherwise gone in researching about the company and calculating the risks.

4. Financial Benefits

The enforcement of LEI in the European trade and also its growing importance has also led to various LEI search engines. Both together, the existence of LEI and a search engine for it helps the interested parties and investors even in terms of saving money which would have otherwise been invested in searching for all the authentic related documents, risk evaluation, financial situation and ownership details of the counterparty.

5. Fraudulence Protection

While globalization and digitalization have seen a spurt in the number of global companies worldwide, fraudulent activities and cyber-crimes in financial institutions and financial services weren’t far behind. The twenty characters Legal Entity Identifier(LEI) and the subsequent LEI database search has kept the frauds to a minimum, providing all the necessary details, risk assessment analysis, and the company hierarchy in a few seconds.

6. Increased Operational efficiency

With the reduction in cost and time the LEI and the subsequent one-stop LEI database search brings, the counterparties enjoy the leisure of operational efficiency thus resulting in increased profits.

7. Global Transparency

In the financial crisis that happened in 2008, a unique identification number to each financial institution was unavailable at that time worldwide. Each country had different code systems to recognize the counterparties in a financial transaction. Thus, making it impossible to identify the financial transaction of individual transactions, to see who is responsible for what and also what was the risk analysis.

With LEI which was developed later as a result of this crisis, a new financial era began which mainly brought in financial transparency globally, this unique identifier let each party know what they were getting into.

8. A Boon To The Financial Technology Developers

With sudden importance given to LEI, it is expected that the LEI will pave a way to financial technology developers to scour into the industry sector analysis and also create new avenues for data analysts. Using  LEI, they will be able to write applications that analyze connections and linkages between companies and datasets as well.

Although LEI sounds simple, it is one of the most useful move in the current global situation. The subsequent LEI search is so simple and efficient. All you need to do is type in the company name you would like to know the details about and in return, you will receive the entire set of information which is legal and financial in nature. There are a lot of LEI search engines which take in minimum details and searches the entire LEI database (which is regularly updated with authentic data ) and provides the complete information.