Wide adoption of Legal Entity Identifiers could save banks millions of dollars

The research was conducted by McKinsey on behalf of the Global Legal Entity Identifier Foundation (GLEIF). With estimated total industry spend on client onboarding equal to USD 40 billion per year, productivity improvements gained through LEI usage could generate cross-sector cost reductions of between 5-10% annually.

LEIs are already used in capital markets globally, where regulators have mandated their use for reporting over-the-counter derivatives transactions. The ability of LEIs to simplify entity identification in the digital age has the potential to unlock more quantifiable value for banks in the near to mid-term.

The study also found that:

• In addition to delivering improved efficiencies and lower costs, widespread LEI usage can generate topline benefits for banks, such as between three to seven fewer days to revenue, improved client retention and a better customer experience, thanks to streamlined processes.
• Wider use of LEIs could address common ‘pain points’ in counterparty identification during client lifecycle management, such as the manual linkage of disparate data and the difficulty in accessing entity legal ownership structure.
• The LEI could help mitigate compliance and credit risk, as it gives banks more holistic views of clients across internal and external data sources.