Adopting the LEI Could Save Banks Billions
Interesting news from the Global Legal Entity Identifier Foundation (GLEIF) this week as research shows that wider use of the Legal Entity Identifier (LEI) by banks could unlock an estimated US $2-4 billion across the global banking sector annually.
While the LEI has been proving beneficial for identification in regulatory environments for some time now, broadening the use of LEIs beyond regulatory reporting could generate significant cost and time savings.
Taking client lifecycle management as a case study, the McKinsey research, commissioned by GLEIF, suggests that the LEI could save the global banking industry US $2-4 billion each year in client onboarding alone. Considering that the total industry spend on client onboarding is equal to $40 billion annually, this translates as a productivity improvement of 5-10% annually through usage of the LEI.
The potential for mass uptake of the LEI to offer streamlined access to data, reduce data duplication and manual data lookups and more easily connect internal and external data sources mean a big improvement in productivity. Other aspects – like client retention, document collation and compliance and risk evaluation would also be improved – and there is great potential for further cost savings in the future.
In May this year the FSB review of the LEI recognised that the benefits and uses of the LEI are multiple and substantial – but cautioned that much higher uptake is needed for it to reach its potential. The cost savings identified in this research could – and should – spur a wider voluntary uptake of the LEI.
Read more, including an infographic and e-book summary of the research, here.