Here's why you need a legal entity identifier to get a loan!

Financial institutions may require borrowers to obtain a Legal Entity Identifier (LEI) as part of their loan application process for several reasons:

1. Regulatory Compliance: Many regulatory authorities around the world require financial institutions to collect LEIs for regulatory reporting and risk management purposes. By requiring borrowers to obtain an LEI, financial institutions can ensure that they are complying with these regulations and avoiding any potential fines or penalties.

2. Improved Risk Management: LEIs can help financial institutions to more accurately assess and manage risk by identifying interconnectedness among legal entities. By requiring borrowers to obtain an LEI, financial institutions can better understand the legal structure and ownership of the borrower, and assess their exposure to various entities.

3. Improved Data Quality: LEIs can help to improve the quality of data used in financial transactions by providing a standardized and consistent way of identifying legal entities. By requiring borrowers to obtain an LEI, financial institutions can ensure that the borrower's legal identity is accurate and consistent across various financial transactions.

4. Simplified Business Processes: The use of LEIs can simplify business processes, such as onboarding of new clients or counterparties. By requiring borrowers to obtain an LEI, financial institutions can streamline the loan application process and reduce the amount of time and resources required to verify the borrower's legal identity.

In summary, financial institutions may require borrowers to obtain an LEI to comply with regulations, improve risk management practices, ensure accurate data quality, and simplify business processes.