In a March 16, 2017 address before the Financial Data Summit in Washington, DC, Richard Berner, Director of the Office of Financial Research (OFR), announced an initiative to identify areas of “duplication, overlap, and inefficiency in regulatory reporting.” The initiative is being undertaken in partnership with the Financial Stability Oversight Council (and its member agencies). The goal of the project is to “improve data quality and reduce the reporting burden” faced by regulated financial firms.
The initiative will seek to reduce financial firms’ reporting burden by, among other things:
- requiring data standards, including precise and agreed-on definitions, identifiers, and formats;
- developing industry-regulator agreement on essential data elements;
- encouraging adherence to best practices in data collection;
- fostering more data sharing among regulators; and
- seeking participation and input from the private sector.
Director Berner said that “financial firms sometimes report the same or similar information to different regulators in different ways and through different technology platforms. Sometimes, data are collected and not used.” According to Berner, for financial firms, this duplication, overlap, and inefficiency represent not just a source of frustration, but a significant and measurable burden and cost. This initiative seeks to relieve some of this frustration and cost by addressing the fragmented data collection of the financial regulatory structure, identifying and removing where possible the obstacles to data sharing between regulators, and increasing the coordination of regulators’ data collection efforts.
In addition to addressing some of the burdens of data collection faced by financial firms in the U.S., the OFR will also be keeping an eye on its primary mandate, data quality, as a means of reducing regulatory burden.
"Data quality . . . offers enormous potential to reduce regulatory reporting burdens. High-quality data that conform to common standards facilitate aggregation, sharing, risk management, and good decision making. High-quality data prevent overlap and duplication among data collections, and facilitate the collection of data once for a variety of purposes by many regulators.”
On example raised by Mr. Berner to illustrate this point is the Legal Entity Identifier (LEI).
"Like a bar code for precisely identifying parties to financial transactions, the LEI helps make the flood of data flowing in the financial system easier to compare and share. The LEI can also generate efficiencies for financial companies in internal reporting and in collecting, cleaning, and aggregating data.
By reducing overlap and duplication, the LEI can ease regulatory reporting burdens. Estimates of industry savings in managing their data by using common standards run into the billions of dollars. Because of these savings, industry groups have called on regulators to broadly adopt the LEI."
U.S. regulators currently lag behind their counterparts overseas in adopting the LEI, most notably in the European Union. Berner said that he would encourage U.S. regulators to abandon their individual and fragmented data identification systems or to map the LEI to those systems. The LEI, according to Berner, is a prime example of a system that increases the quality of data collected in a way that is consistent, uniform, and shareable across regulators.
In closing, Berner encouraged input from members of the private sector on the duplication, overlaps, unnecessary requirements, and similar burdens they encounter.
The full text of Director Berner’s speech is available via: https://www.financialresearch.gov/public-appearances/2017/03/16/financial-data-summit/