LEI beyond a formal requirement
The LEI code is often seen as a formal obligation. Something that must be completed so an account can be opened, a transaction processed, or a regulatory requirement fulfilled. This view is understandable, but it only reflects part of the LEI system’s purpose.
An LEI is not just an identifier. It is a structured data framework. Its real value becomes visible when looking beyond basic reference information, especially at what is known as Level 2 data.
If Level 1 data answers the question of who an entity is, Level 2 data answers a more strategic question. It shows who ultimately controls that entity. At this point, the LEI moves from being a technical necessity to becoming a source of practical business insight.
Seen this way, the LEI becomes not just a compliance tool, but a foundation for understanding corporate relationships.
The difference between LEI Level 1 and Level 2 data
LEI Level 1 data describes the legal entity itself. It includes essential reference information such as the official name, legal form, registered address, and jurisdiction. In simple terms, it establishes identity.
Level 2 data adds another layer. It describes ownership relationships. Specifically, it indicates whether an entity has a direct or ultimate parent and where actual control is located.
This information is not provided as free text. It follows a standardized and verified structure and is machine-readable, as defined by the GLEIF. That makes it comparable across jurisdictions and suitable for automated use across systems.
In practice, Level 2 data creates an official and globally consistent view of corporate ownership relationships.
Why ownership structure matters in modern business
In today’s business environment, surface-level information is no longer enough. Companies increasingly need to understand who stands behind a counterparty, where decisions are made, and where responsibility ultimately lies.
This is not theoretical. Ownership structure directly affects risk assessment, compliance, and trust. It plays a role in financial services, international trade, investment decisions, and everyday partner selection.
An entity that is part of a larger corporate group may offer stability and scale. At the same time, complex or opaque ownership structures can increase uncertainty and risk. Without standardized data, these assessments often rely on assumptions rather than facts.
Level 2 LEI data helps replace assumptions with verified structure.
How Level 2 data is used in practice
Level 2 data is not limited to regulatory reporting.
It is already used in real operational processes, as illustrated by GLEIF in its explanation of how Level 2 data answers the question of who owns whom.
Financial institutions rely on ownership information during customer due diligence and KYC checks. A clear and standardized view of corporate control helps speed up onboarding and reduces the need for repeated clarification.
Large organizations use Level 2 data when assessing suppliers and business partners. This is especially important in cross-border relationships where local registries may not provide a complete picture.
In risk management and compliance, Level 2 data supports the identification of group-level exposure and hidden connections. These links might otherwise remain fragmented across multiple data sources.
Regulators and analysts also benefit from this structure. Machine-readable ownership data makes it easier to detect patterns and relationships that are difficult to identify in unstructured information.
Why the value of Level 2 data is often overlooked
Despite its practical relevance, many companies do not actively think about Level 2 data. LEI renewal is completed because it is required, while the underlying data content receives little attention during the LEI renewal process.
The LEI is often treated as a gateway. As long as the code is valid, the task appears complete. In reality, the usefulness of an LEI depends on the quality and accuracy of the data behind it.
Companies with correct and up-to-date ownership data reduce friction. Banks, partners, and counterparties can rely on existing information instead of requesting additional explanations.
The difference between meeting a requirement and being operationally prepared often becomes visible only when speed and clarity matter.
Level 2 data as part of a global trust framework
The broader purpose of the LEI system is not limited to identification. Its goal is to create a global trust layer where corporate relationships are transparent and comparable, a topic we have also explored in earlier LEI-related articles on our blog.
This approach is consistently emphasized by GLEIF, whose focus extends beyond issuing identifiers to ensuring that LEI data is usable in real-world decision-making. The value lies not only in having data, but in being able to rely on it.
Level 2 data is a natural part of this framework. It helps turn legal entities into understandable components of a wider economic network.
Conclusion
LEI Level 2 data is not an optional detail. It is a core element of transparency in modern business.
Organizations that treat the LEI purely as a compliance requirement meet the minimum standard. Those that understand and maintain their Level 2 data position themselves for smoother cooperation, stronger risk management, and greater trust.
An LEI is more than a number. When its data is accurate and complete, it becomes a foundation for clearer and more confident business relationships.