Last month, European Central Bank (ECB) president Jean-Claude Trichet delivered the opening address to the central bank’s own conference on statistics and much of his speech was strangely familiar. Referring directly to the need for a “public reference data utility” that could provide “standardised information on instruments and entities that would be operated on the basis of an international agreement”, Trichet is obviously championing the work of his head of external statistics Francis Gross, who has been leading the charge in Europe for such a utility.
However, this is not an isolated incident: Trichet has been talking about the need for strong data foundations to support the functions of the European Systemic Risk Board (ESRB) for some time. The ESRB’s main tasks will be: to identify and prioritise systemic risks; to issue early warnings when significant systemic risks emerge; and to issue policy recommendations for remedial action in response to the risks it identifies. One of the main requirements for conducting accurate and efficient macro-prudential oversight is to have a solid data foundation on which to base judgements with regards to systemic risk analysis.
The call by Trichet, then, for “enhanced” economic and financial statistics is in the context of enabling the European level regulators to more accurately track systemic risk across the region. This type of statistical analysis is already a duty of the ECB in line with its role of setting monetary policy strategy and it has its own Centralised Securities Database (CSDB) in order to conduct this task. The central bank is therefore well positioned, along with the national central banks of each European country, to feed this statistical data to the ESRB and other European level regulatory bodies.
Trichet is keen, however, for a separate public reference data utility to add to the CSDB’s statistical data. “Detailed and reliable data on securities issues and holdings are indispensable to any systemic risk assessment,” said Trichet. “The CSDB would be best complemented by a public reference data utility providing standardised information on instruments and entities that would be operated on the basis of an international agreement.” This is a clear indication that Trichet is reading from the same hymn sheet as Gross.
Given his public support of the idea, does this mean that the concept of a reference data utility has legs in the European context? With all the political upheaval in the US, the future of the Office of Financial Research’s own version of a data utility for the US market is far from certain. In the post-election landscape, the Dodd-Frank reforms may undergo heavy revisions and the new systemic risk monitoring agency may face the chop if it is deemed to be too expensive (US$500 million is not a price tag to be sniffed at in these tough economic times).
Could Europe end up leading the charge with regards to a securities reference data utility? A lot of meetings have been going on behind the scenes between the ECB and the European and US regulators, after all. Watch this space…