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A-Team Insight Blogs

ECB’s Draghi Cites Data Granularity in Pursuit of Financial Stability

Mario Draghi, president of the European Central Bank (ECB), this week noted the need for a wider variety of granular data to sustain financial stability and more data to monitor and avoid potential systemic risk in unregulated financial institutions and markets.

Opening the sixth ECB Statistics Conference in Frankfurt, Draghi described the dependence of policy-makers in monetary policy and financial stability on work being done to maintain a stream of timely, relevant and reliable data.

He said: “The financial crisis has dramatically increased the need for very timely, granular data. And it has led to a rethinking of a number of organisational and conceptual aspects in statistics.”

Among these he highlighted the need to consolidate data at the level of banking or insurance groups, explaining: “The traditional monetary statistics derived from individual banks’ balance sheets are insufficient to gather information on financial groups that operate across borders and through non-bank subsidiaries. This is because the monetary statistics cover only the euro area and do not focus on the various kinds of risk to which banks are exposed and the adequacy of their capital in view of those risks.”

Moving from macro aggregates to micro data, Draghi touched on financial stability, saying: “For financial stability purposes, in particular, a wider variety of granular data and indicators are needed and more emphasis needs to be put on data outliers and so-called tail risks.”

On systemic risk, he commented: “As we have learned, systemic risk may stem from any part of the financial system, including the shadow banking sector. That is why we also need more data to monitor unregulated financial institutions and markets.”

Draghi reviewed worldwide efforts to fulfil the 20 recommendations set down in the 2009, G20 endorsed report ‘The Financial Crisis and Information Gaps’ and went on to describe some statistical initiatives being undertaken by the ECB to fill data gaps and meet the bank’s mandate to deliver price stability and the European Systemic Risk Board’s mandate to mitigate systemic risk.

Commenting on an initiative to build a securities holdings statistics database, Draghi said: “Securities holdings represent a field where exposures are often concentrated and a lack of sufficiently comprehensive, consistent and granular information has been identified. The aim of developing a detailed dataset on securities holdings is to combine holdings of large players in the euro area with information on the individual issuers across the world. This will provide a potentially very useful tool for both monetary policy and macro-prudential analysis.”

He also outlined work to extend the Eurosystem database to provide more detailed information on the activities of financial institutions and instruments, and a Eurosystem initiative to amend its statistical legal acts to align economic and financial statistics with recently revised international statistical standards designed to achieve consistency between domestic sector accounts and statistics for the rest of the world.

Turning to organisations that must support the burden of increasing data, he said: “The ECB is well aware that closing information gaps requires significant efforts by all parties involved – the statisticians, the reporting agents and the data users. It is also clear now more than ever that a lack of good quality information on which to base decisions can be far more costly to society than the collection of new, additional data.”

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