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Macro-prudential analysis and oversight are not new tasks for central banks. In broad terms, the objective of macro-prudential analysis and oversight is to identify and prevent systemic risk, so as to minimise the costs that financial instability can impose on the real economy. Pursuing this objective calls for the definition of qualitative and quantitative intermediate goals, which can pose considerable analytical and informational challenges.
Over the past few years, the financial crisis has clearly illustrated just how devastating the materialisation of systemic risk can be for the financial sector and the broader economy. In particular, the financial crisis has demonstrated the need for a coherent and well-articulated macro-prudential policy framework at the national, European and global level. In this respect, it exposed deficiencies in the information base on which macro-prudential oversight was being conducted. It is on this latter topic that I will focus my presentation today.
In assessing the question as to how fit statistics are for use in macro-prudential oversight, Mr Constâncio outlines the data needed for macro-prudential analysis, touching upon the ECB’s responsibilities in the field of macro-prudential oversight. He then moves on to reflect on what has been achieved so far, paying particular attention to the macro and microdimensions of data requirements. Finally, he highlights what is missing and mentions a number of important ongoing initiatives that could help to overcoming the key challenges in terms of data that still needed to be dealt with.
Conclusions
Data challenges would be far more modest, and the need for supervisory information reduced, if the level of public disclosure, the quality and the accessibility of, and consistency in, financial public reporting were more satisfactory. This would also benefit market participants at large – notably by reducing uncertainty with respect to counterparties. Further encouragement and guidance by national authorities (in addition to another FSB initiative on disclosure) could be provided to improve the financial reporting of institutions and to enhance the quality of disclosures.
On another front, the establishment of a common legal entity identifier (LEI) that is applied universally should contribute greatly to the quality of macro-prudential analysis. In fact, the demand for micro-prudential datasets for macro-prudential analysis also results from the fact that the form in which existing aggregated data can be disseminated is often of poor quality, is not sufficiently granular, and is not suited for analytical purposes.
Ahead of reaping the benefits from the various initiatives that are underway at the global, EU and euro area level to limit data gaps, there is a need for close cross-institutional cooperation between supervisory authorities and macro-prudential bodies, at the national and supra-national level. This calls for more interaction and data-sharing between the ECB (also when acting on behalf of the ESRB) and the ESAs that have access to supervisory reporting data and can collect ad hoc data more easily upon request. Procedures for the secure transfer of information and appropriate legal provisions need to be in place to safeguard confidentiality.
More broadly, it is important that the pace at which efforts are being made to address current information needs – at the macro- and micro-levels – does not slow down. At the same time, improvements in datasets already in use for macro-prudential analysis should continue to be given priority. This needs to be done in an innovative way, reusing existing information where possible, so as to minimise the reporting burden, whilst serving the increased demands of users. Furthermore, challenges in ensuring that the appropriate statistical basis is available for macro-prudential oversight cannot, by definition, be addressed in full as data sets are dynamic, in the same way that the risks they capture evolve over time. Agility in the collection of statistics will therefore continue to be essential so as to accompany innovation in the financial industry and the associated vulnerabilities.