Last updated March 10, 2026
An LEI code (Legal Entity Identifier) is a unique 20-character identifier used across global financial markets to identify the legal entities involved in financial transactions. For a full explanation of what an LEI code is and how it is structured, see What is an LEI code?
The LEI was established following the 2008 financial crisis, endorsed by the G20 and the Financial Stability Board as a global standard for entity identification in financial markets.
In banking, the LEI code is a core piece of infrastructure. Banks and financial institutions use it to identify counterparties, meet transaction reporting obligations under a growing number of regulations, verify client identity during onboarding, and enable straight-through processing in cross-border payments. Over 300 regulations reference the LEI, and for banks in particular, a missing or lapsed LEI code on a counterparty can block a trade, fail a regulatory report, or stall an onboarding workflow.
This article covers how the LEI code is used in banking, which regulations require it, and what banks need to know about managing LEI codes for their own entities and their clients.
Many global banks partner with RapidLEI for management of their LEI Codes. Citi, Nordea, Santander, Sparkasse, BNP are just a few of RapidLEI’s banking customers.
How do Banks use LEI Codes?
Banks interact with the LEI code across several operational areas, each with distinct compliance and risk management implications.
Counterparty identification is the most fundamental use. Before executing a trade or entering a financial contract, a bank must be able to verify the legal identity of the other party. The LEI code provides a single, globally recognised organisation identifier that is consistent across jurisdictions, eliminating the ambiguity that arises from using company names, local registration numbers, or proprietary internal identifiers. Banks query the Global LEI Index to retrieve verified entity data, which includes verified legal name, registered address, incorporation status, and ownership structure, all directly from an authoritative source.
Regulatory reporting is where the LEI code becomes mandatory rather than optional. Regulations including MiFID II, EMIR, and Instant Payments Regulation require banks to identify both their own legal entities and their counterparties using LEI codes in transaction and trade reports. A missing LEI code can cause a report to fail validation entirely. See the section below on specific regulations for detail.
Transaction monitoring and AML benefit from the LEI because it provides a consistent, verified identity for entities involved in transactions. Rather than relying on unstructured name matching, which is error-prone and resource-intensive, banks can use LEI codes to anchor entity identity in their AML and sanctions screening workflows, reducing false positives and improving the reliability of monitoring systems.
Client onboarding and KYB is an area of growing LEI adoption. Banks conducting Customer Due Diligence (CDD) or Enhanced Due Diligence (EDD) on corporate clients can use the LEI code to retrieve verified Level 1 data (who the entity is) and Level 2 data (who owns it) directly from the GLEIF database, reducing manual verification effort and improving data quality at the point of onboarding.
Cross-border payments increasingly depend on the LEI code as ISO 20022 adoption accelerates. The LEI is a supported identifier in ISO 20022 payment messages, enabling banks to embed verified entity identity directly into payment instructions. This is particularly relevant in the context of the Bank of England’s CHAPS requirements and EU Instant Payments Regulation.
Overall, LEIs play a crucial role in improving transparency, efficiency, and risk management in banking operations by providing a standardized and globally recognized identification system for legal entities involved in financial transactions.
Which Regulations Require an LEI Code in Banking
The LEI code is referenced in over 300 regulatory frameworks globally. For banks and financial institutions, the most directly relevant are grouped below by their primary function: transaction reporting, payments, and broader jurisdictional requirements.
MiFID II / MiFIR: The Markets in Financial Instruments Directive is the most widely felt LEI regulation for banks in Europe. Regulated firms must identify legal entity clients using a valid LEI code when executing and reporting transactions. The principle is effectively “no LEI, no trade”, meaning that if a counterparty does not hold a current LEI code, a bank or investment firm may be required to decline the transaction. This applies to equities, bonds, derivatives, and other financial instruments in scope. Learn more: MiFID II and the LEI
EMIR: The European Market Infrastructure Regulation requires LEI codes to be used in derivatives trade reporting. Both counterparties to a reportable derivatives transaction must hold a valid LEI code, and that code must appear in reports submitted to an approved Trade Repository. A lapsed LEI code on either side creates reporting failures and direct compliance exposure for the bank responsible for the report. Learn more: LEI Regulations
FATF Recommendations 16 and 24: The Financial Action Task Force (FATF) recommendations on wire transfers and transparency of legal arrangements directly impact how banks identify entities in payment chains. FATF 16 requires banks to include verified originator and beneficiary information in wire transfers, and the LEI is increasingly recognised as the preferred mechanism for satisfying this requirement for corporate entities. FATF 24 addresses transparency of legal arrangements including trusts and corporate structures, where LEI codes support the beneficial ownership identification that banks are expected to perform. Learn more: FATF 16 & 24
EU Instant Payments Regulation (IPR): The IPR requires payment service providers in the EU to offer instant credit transfers in euros and to verify payee identity before processing. The LEI code is the designated identifier for legal entity payees under the regulation, meaning banks processing instant payments on behalf of corporate clients need to be able to match and verify LEI codes as part of the payee verification process. This is a significant operational requirement for banks active in euro payment markets. Learn more: EU Instant Payments Regulation
Bank of England CHAPS: In the UK, the Bank of England has mandated the use of ISO 20022 messaging in CHAPS, the UK’s high-value payment system. ISO 20022 messages support the LEI as a structured identifier for originators and beneficiaries, and the Bank of England expects banks to populate LEI fields where the counterparty holds one. This embeds the LEI code directly into the UK’s core payment infrastructure and makes LEI adoption a practical operational requirement for banks active in CHAPS. Learn more: Bank of England CHAPS
Jurisdictional requirements beyond Europe: LEI adoption in banking is not limited to EU and UK regulation. The Reserve Bank of India (RBI) has mandated LEI codes for large-value transactions above certain thresholds, requiring Indian banks and their corporate counterparties to hold and report LEI codes in a growing range of payment and reporting contexts. This makes the RBI one of the most significant non-European regulators driving LEI adoption in banking, and reflects the broader global trend of central banks and regulators embedding the LEI into domestic financial infrastructure. Learn more: Reserve Bank of India (RBI)
For a full overview of LEI regulations across all jurisdictions, see the LEI Regulations page.
LEI Code in Client Onboarding and KYB
For banks that onboard corporate clients, the LEI code is becoming a practical tool for streamlining Know Your Business (KYB) processes. Rather than manually gathering and verifying entity data from multiple national registries, a bank can retrieve verified Level 1 and Level 2 LEI data directly from the Global LEI Index at the point of onboarding.
Level 1 data provides the entity’s legal name, registered address, incorporation jurisdiction, and registration number, which comprises the core information required for Client Due Diligence. Level 2 data provides the ownership structure: who the entity’s direct and ultimate parents are, and what subsidiaries it controls. This ownership transparency is particularly valuable for Extended Due Diligence on higher-risk clients and for understanding beneficial ownership in complex group structures.
Banks that are accredited as GLEIF Validation Agents can go further, incorporating LEI issuance directly into their client onboarding workflow. This allows the bank to issue or verify an LEI code as part of onboarding rather than requiring the client to obtain one separately, removing friction and ensuring the LEI is in place before it is needed for reporting or transactions. Learn more about how the LEI supports KYB.
LEI Code in Cross-Border Payments
The LEI code is increasingly embedded in the infrastructure of cross-border payments as the financial industry migrates to ISO 20022 messaging standards. ISO 20022 payment messages support the LEI as a structured identifier for both the ordering institution and the beneficiary, enabling richer, more machine-readable data to flow alongside payment instructions.
This has direct implications for banks. As CHAPS, SWIFT, and other payment systems complete their ISO 20022 migrations, banks are expected to populate LEI fields in payment messages where the counterparty holds one. Doing so improves straight-through processing rates, reduces payment delays caused by poor entity data, and supports the financial crime screening requirements that regulators increasingly expect to be embedded in payment workflows.
The EU Instant Payments Regulation also references the LEI as part of the framework for verifying payee identity in instant payment transactions, further embedding the LEI code into the day-to-day operations of banks active in European payment markets. Learn more: LEI in Payments
Frequently Asked Questions
Do all banks need an LEI code?
Any bank or financial institution that engages in regulated financial transactions, derivatives reporting, or is subject to MiFID II, EMIR, or equivalent regulations will require a valid LEI code. Banks also typically need LEI codes for each legal entity within their group structure that participates in regulated activity.
What happens if a counterparty’s LEI code is lapsed?
A lapsed LEI code means the entity’s registration has not been renewed and the data may be out of date. Under MiFID II and EMIR, a lapsed counterparty LEI can result in a failed transaction report or, in some cases, a refusal to execute the trade. Banks should check counterparty LEI status before executing reportable transactions using a tool such as the LEI Search.
Can a bank have more than one LEI code?
Yes. Each distinct legal entity within a banking group requires its own LEI code. A large international bank may hold dozens or hundreds of LEI codes across its group entities, branches, and subsidiaries. Managing these at scale requires a structured approach to LEI lifecycle management.
What is the difference between a BIC/SWIFT code and an LEI code?
A BIC (Bank Identifier Code) identifies a bank for the purposes of routing payment messages within the SWIFT network. An LEI code identifies a legal entity for regulatory, compliance, and counterparty verification purposes. The two identifiers serve different functions and are not interchangeable, though they can be linked. The LEI Search tool supports BIC-to-LEI lookups for this reason.
How do banks manage LEI codes for their clients?
Banks that act on behalf of clients, for example, executing trades or submitting regulatory reports, need to ensure their clients hold valid LEI codes. Some banks manage this through a Registration Agent or Validation Agent arrangement, allowing them to register, renew, and maintain LEI codes on behalf of clients as part of their service offering.
For information on how banks manage LEI codes at scale, including bulk registration, client LEI management, and GLEIF Validation Agent programs, see LEI Solutions for Banks.