Not least the frequently cited deficiencies of the Greek statistical system (with respect to both methodological and institutional aspects) have reminded us of the importance of reliable, accurate and timely statistics for the functioning and credibility of our whole system.
Market events over the past several years have made it quite clear that meaningful and transparent financial data are vital to effective monitoring of market participants as well as understanding the scale of the shadow banking activities and their interconnectedness with the traditional banking system. In a June address in Frankfort, Jürgen Stark, a member of the Executive Board of the European Central Bank (ECB), announced new statistical data sets intended to improve the existing balance sheet and interest rate reporting by “monetary financial institutions.” The ECB has introduced these new data sets as part of their effort develop relevant and real-time policies to assess systematic risks and keep apace of innovations and movements in the financial landscape.
These new statistics are designed to:
1. Monitor securitisation via new quarterly balance sheet statistics that cover “financial vehicle corporations engaged in securitisation;”
2. Provide enhanced detailed quarterly data on the balance sheet of insurance corporations and pension funds; and
3. Provide improved interest rate statistics allowing a deeper analysis of the transmission channels of monetary policy. (e.g., how the external financing conditions of small and medium-sized non-financial enterprises compare with those of large corporations). .
Given the rapid evolution and innovation of securitization activities, particularly amongst banks representing the money-issuing sector, precise statistical measures are imperative to regulators’ and policy makers’ abilities to make sense of trends, risk concentrations, scale, and linkages between shadow banking and the traditional banking systems. As mentioned earlier, these kinds of statistics were absent or inadequate leading up to the financial crisis.
A major aspect of financial innovation is linked to the securitisation of financial assets by, in particular, the banking sector, and to the financial vehicles created outside the banking sector for this purpose. The lack of good statistical information on securitisation gained increasing relevance over the last decade and became particularly obvious in the financial crisis.
These new data sets are the beginning, not the end, however. In order to remain meaningful, the market metrics must be both robust and timely, and retain the flexibility to be responsive to rapid market evolution and technological change. Mr. Stark made clear that the ECB intends for these and future data sets to be catalysts, with good data feeding policy decisions, and policy analysis identifying areas where statistical improvements, refinements, or additional data may be required.
Enhancements in monetary and financial statistics make it possible to keep track of financial innovation, thereby facilitating an enhanced monetary analysis and thus ensuring an effective policy decision-making process. The enhanced monetary analysis and its use in the policy-making process, in turn, identify necessary improvements to the statistics, thereby closing the circle.
Harmonizing standards on a global scale may in turn harmonize data collection, and improve monitoring, policy making, and regulation across the global financial landscape. ECB has called for a more global cooperation in regulation, standard setting, and data gathering, and is working closely in with the International Monetary Fund and the Financial Stability Board in an ambitious effort to develop standardization in the reporting and registration of individual financial products, transactions, and financial institutions.