The Bank of International Settlements (BIS) compare the standardization power of the LEI to that of the standardization of the shipping container and the economic advantages that came with it.
The paper written by Francis Gross alludes to the fact that making basic micro-data freely available on participants in a marketplace would have huge benefits to the wider economy, but must be i) globally standardised, ii) real time and iii) must be granular. These are the three key characteristics which make up the global LEI system.
The Legal Entity Identifier has previously been compared to shipping containers in a 2014 Forbes article by Tom Groenfeldt
“When shipping containers were first introduced, they came in a variety of shapes and sizes, so it was difficult to transport and store them. A public-private partnership led to the development of the standard 20- and 40-foot containers.
The introduction of the Legal Entity Identifier (LEI) system offers a global system to identify legal entities. The primary benefit of the LEI system comes from its KYC (know your customer) applications. The ability to identify and aggregate all the existing and potential clients inside corporate systems that brings big benefits to many entities. This includes when dealing with a customer thousands of Kilometres away such as a supplier of cargo ships or potential client looking to use your services.
“It is the only open, standardized and regulatory-endorsed system capable of establishing digitized trust between all legal entities, everywhere” - GLEI
Other benefits of the Legal Entity Identifier System Include:
1. It is Unique: The Legal Entity Identifier system architecture assumes that only one LEI can be assigned to a legal entity. It assumes LEIs cannot be reused, duplicated and are annually renewed.
2. Reduce Risk: The LEI system can reduce risk associated with financial transactions because you are more able to assess the situation and make informed decisions.
3. Reduce Onboarding Costs: LEIs can reduce onboarding costs by 10%, resulting in an overall reduction in capital market operating costs. McKinsey recently published a study claiming that broader adoption of the LEI would save the global banking sector between 2-4 billion USD annually.
4. Promote Transparency in the Marketplace: By registering for an LEI, you’re making a commitment to promoting transparency within the global marketplace and improving your own credibility. The LEI system is destined to become the global standard for the unique identification of legal entities across the global financial sector and beyond.
How to get an LEI Code:
LEI Worldwide have been providing LEIs globally since 2017. With global coverage, LEI Worldwide can have an LEI code issued to you within hours regardless of your jurisdiction or entity type.
LEI Worldwide allow you to get your LEI Number hassle free and no need to even register an account. To receive confirmation of your new LEI number in the fastest, most secure way possible complete the 5 minute LEI application form here.
I like how you mentioned that it is important to consider what will reduce the risk. My uncle mentioned to me last night that he and his friend are planning to hire a shipping container for business purposes and asked if I have any idea what is the best option to do. Thanks to this informative article and I'll be sure to tell him that they can consult a trusted shipping container provider as they can answer all their inquiries and will provide their desired size of the container.
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