Most Popular

What’s New?

Can a business invest in stocks?GLEIF’s verifiable LEI issuer qualification programWhat are child entities and how do they relate to other entities?Do I need an LEI when selling shares?Business Transparency: How to create an environment of trustAnti Money Laundering (AML) in banking: Everything you need to knowKYC in banking: Why it’s important and how to comply?Corporate structures demystified: What you need to know?ASIC releases a new consultation paper about changes to its derivative transaction rulesWhat is a parent company and how does it work?How long does it take to get an LEI?ISO 5009 – Identifying organizational rolesISO 17442 – Standard for LEI code structureESRB discusses the future of LEILegal Entity Identifier (LEI) vs Tax Identification Number (TIN) in AustraliaWhat documents are required for LEI registration in Australia?Who is an LOU in the LEI dimension?GMEI vs LEI RegisterLapsed LEI – Why should you keep your LEI active?Who is an LEI Registration Agent?Are LEIs public?What is LEI transfer?Can an individual have an LEI?Who needs an LEI code?Do LEI numbers need to be renewed?Why is an LEI code required?How much does an LEI code cost?LEI Lookup – Fully dedicated LEI search websiteISIN to LEI mappingGLEIS | Global LEI SystemMiFID regulation | MiFID II LEIvLEIGLEIF | Global Legal Entity Identifier FoundationCompany Autocomplete by LEI RegisterOpen LEIEuropean Market Infrastructure Regulation | EMIRWhat is an LEI database?Legal Entity Identifiers in cryptocurrencyLegal Entity Identifiers in KYCDigital identity predictions for 2020The future of cybersecurity – DeloitteLegal Entity Identifiers in digital certificatesBroad adoption of LEIs could save the global banking sector $2-4 billionLegal Entity Identifiers for government entitiesThe European Market Infrastructure Regulation (EMIR) and Legal Entity Identifiers (LEIs)The FCA will take a pragmatic approach to supervising reporting on Brexit DayAdoption of LEI in payment messages by the Payments Market Practice Group (PMPG)RegTech London – Event summaryCybersecurity in a nutshellLEI deadline postponed by ASICHow to get an LEI in Australia?What is LEI-search?LEI Register and RapidLEI announce an official partnership

Broad adoption of LEIs could save the global banking sector $2-4 billion

The Global Legal Entity Identifier Foundation (GLEIF) has sought the help of McKinsey to report on the global adoption of Legal Entity Identifiers or LEIs, and the conclusions of the now-published report show that the banking industry could save between $2-4 billion in client onboarding and if more widely adopted, they could help the banking industry save between 5-10% globally. This represents a total figure of around USD 40 billion.

Client onboarding is just one area where LEIs have the potential to help save time and money. Other areas that it could help are in the client lifecycle at transacting, compliance, reporting, risk monitoring, and more.

The figure below provides a list of bank processes that have a lot to gain from the introduction of LEIs into client lifecycle management.

Broad Adoption of LEIs Could Save The Global Banking Sector US $2-4 Billion 1

Onboarding

McKinsey took client onboarding and created a more in-depth report on the potential savings in this area of client lifecycle management. Today, banks spend around $40 billion on client onboarding annually. By widely adopting LEIs, banks could save £2-4 billion.

This is because, by using LEIs to streamline the connection between internal and external data sources, banks could reduce onboarding time by 14%. Other benefits include:

  • 3-7 days fewer to revenue,
  • improved client retention,
  • better customer experience (due to fewer requests for data and documents during onboarding),
  • and mitigated compliance and credit risks (due to a more holistic view of internal and external data sources).

Broad Adoption of LEIs Could Save The Global Banking Sector US $2-4 Billion 2

The broader picture

The report shows that LEIs are mostly used in onboarding but are only ever used at the end of the onboarding process. It recommends that the banking sector do more to move LEIs to the beginning of the onboarding process. This would expedite counterparty identification and verification, increase compliance and improve KYC processes.

Post-onboarding, the LEI could be used with KYC refreshers on a periodical basis and additional verification for special payments and ongoing monitoring of counterparties. For example, negative news regarding a counterparties credit or business activity.

In the 50 interviews conducted with major banks, 4 pain points were identified.

  1. Manual linking of entity data from disparate internal and external sources.
  2. Difficulty in assessing entities’ legal ownership structure.
  3. Limited transparency into entities’ key officers.
  4. Poor customer experience due to having to make multiple round trips to gather client data and documents.

Broad Adoption of LEIs Could Save The Global Banking Sector US $2-4 Billion 3

The report itself says:

“The study found that many banks try to resolve these problems by implementing various technical solutions, increasing headcount, or just accepting longer cycle times. Since none of these methods fully resolves any of these pain points, many banking interviewees responded enthusiastically to the idea of using LEIs to identify and verify counterparties.”

The report concludes by suggesting that the banking sector should

“participate in the ensuing discussion on the support needed for banks to integrate the LEI into CLM processes. GLEIF also welcomes the opportunity for dialogue with banking associations, alliances and broader stakeholders on this matter and will be pursuing collaboration initiatives on a global scale.”