data gathering and financial regulation
DESCRIPTION
Data Gathering and Financial Regulation. Mark Allen CASE Research, Warsaw. The financial crisis has been immensely expensive. Cost of the financial crisis ( percent of GDP , 2008-11). * Change in percentage points, 2007-2010. The crisis was primarily a failure of regulation. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/1.jpg)
Data Gathering and Financial Regulation
Mark AllenCASE Research, Warsaw
![Page 2: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/2.jpg)
The financial crisis has been immensely expensive
Cost of the financial crisis (percent of GDP, 2008-11)
* Change in percentage points, 2007-2010
![Page 3: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/3.jpg)
The crisis was primarily a failure of regulation
• Bankers are responsible for the stability of their bank (and a few other things)
• Regulators are charged with ensuring that the financial system is stable
![Page 4: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/4.jpg)
What caused the regulatory failure?
• Misplaced belief that financial innovation had reduced risks
• Insufficient appreciation of network fragility
• Complacency• Possible regulatory capture
![Page 5: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/5.jpg)
Financial interconnectedness indexes
Source: IMF
![Page 6: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/6.jpg)
Financial InterconnectionsBanking System
(cross-border bank claims = $30 Trillion)= net bilateral exposures
IMF
![Page 7: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/7.jpg)
Financial Interconnections”Shadow” Banking System(total claims = $25 Trillion)
Coverage:Money market fundsMutual fundsHedge fundsPension fundsExchange traded funds
= net bilateral exposures
Source: BIS reporting banks, IMF
![Page 8: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/8.jpg)
Poor data did not cause the crisis
“The main reason why crises occur is not lack of statistics but the failure to interpret them correctly and to take remedial action.”
Claudio Borio (BIS)
![Page 9: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/9.jpg)
Poor data did not cause the crisis
But– The crisis revealed how little the regulators
knew about the system.– Absence of data made it more difficult to
handle the crisis.
![Page 10: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/10.jpg)
“If you put together all the subprime mortgages in the United States and assumed they were all worthless, the total losses to the financial system would be about equivalent to one bad day in the stock market …. The problem was that they were distributed throughout different securities and different places and nobody really knew where they were and who was going to bear the losses.”
Ben Bernanke
![Page 11: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/11.jpg)
Poor data did not cause the crisis
But– The crisis revealed how little the regulators
knew about the system.– Absence of data made it more difficult to
handle the crisis.– Bank managements also knew less than
they should have about their firms’ risks.
![Page 12: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/12.jpg)
Risk management practices within major firms were also inadequate
Senior Supervisors Report (2008) of 20 leading financial institutions:
“inadequate and often fragmented technological infrastructures that hindered effective risk identification and measurement.”
“Many firms lacked the ability to aggregate exposures, particularly gross and net exposures to institutional counterparties, in a matter of hours.”
“A number of firms also experienced difficulties integrating credit and market risks at the enterprise level and evaluating the two jointly in a consistent manner.”
![Page 13: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/13.jpg)
"A densely interconnected highly leveraged financial system is intrinsically vulnerable to collapse."
Robert Solow
![Page 14: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/14.jpg)
• “The step-up in our monitoring is motivated importantly by a shift in financial regulation and supervision toward a more macroprudential, or systemic, approach, supplementing our traditional microprudential perspective focused primarily on the health of individual institutions and markets.”
Ben Bernanke
![Page 15: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/15.jpg)
G-20 Regulatory Reform Agenda:Key Elements and Progress
![Page 16: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/16.jpg)
SIFI Framework: Tackling TBTF
![Page 17: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/17.jpg)
G-20 Regulatory Reform Agenda:Key Elements and Progress
![Page 18: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/18.jpg)
Dealing with Shadow Banks
![Page 19: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/19.jpg)
G-20 Regulatory Reform Agenda:Key Elements and Progress
![Page 20: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/20.jpg)
G-20 Data Gaps Initiative(November 2009)
Main elements• Build-up of risk in the financial sector• Cross-border financial linkages• Vulnerability of domestic economy to
shocks• Improving communication of official
statistics
![Page 21: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/21.jpg)
G-20 Data Gaps InitiativeArea of concern Framework exists and data
being reportedConceptual framework to be developed
Build-up of risk in financial sector
• Financial Soundness Indicators • Credit Default Swaps• Securities
• Tail Risk in the Financial System• Aggregate Leverage and Maturity Mismatches; • Structured Products
Cross-border linkages
• Coordinated Portfolio Investment Survey• International Banking Statistics• International Investment Positions
• Global Network Connections• Systemically Important Global Institutions• Financial and Nonfinancial Corporations’ Cross Border Exposures
Vulnerability of economy to shocks
• Institutional Sector Accounts• Government Finance Statistics• Public Sector Debt• Real Estate Prices
• Distributional Information
Communicating official statistics
• Principal Global Indicators
![Page 22: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/22.jpg)
Systemically Important Financial Institutions (SIFIs): Data Gaps
![Page 23: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/23.jpg)
SIFI data enhancement plan
![Page 24: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/24.jpg)
G-20 Data Gaps InitiativeArea of concern Framework exists and data
being reportedConceptual framework to be developed
Build-up of risk in financial sector
• Financial Soundness Indicators • Credit Default Swaps• Securities
• Tail Risk in the Financial System• Aggregate Leverage and Maturity Mismatches; • Structured Products
Cross-border linkages
• Coordinated Portfolio Investment Survey• International Banking Statistics• International Investment Positions
• Global Network Connections• Systemically Important Global Institutions• Financial and Nonfinancial Corporations’ Cross Border Exposures
Vulnerability of economy to shocks
• Institutional Sector Accounts• Government Finance Statistics• Public Sector Debt• Real Estate Prices
• Distributional Information
Communicating official statistics
• Principal Global Indicators
![Page 25: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/25.jpg)
Implementation of Data Gaps Initiative(as of September 2012)
Framework needs developing
Framework exists
Real Estate PricesPrincipal Global IndicatorsStructured Products
Leverage & Maturity Mismatches
Public Sector Debt
Government Finance Statistics
Tail Risks in the Financial System Sectoral Accounts
Collection and Sharing of Data on Global Network
Connections and G-SIFIs
International Investment Position (IIP)
Common Template for Global Network and G-SIFIs
International Banking Statistics (IBS)
Coordinated Portfolio Investment Survey (CPIS)Consolidation concepts
Financial and Nonfinancial Corporations Cross-border Exposures
Distributional Information
Securities Statistics
Credit Default SwapsFinancial Soundness Indicators
Source: FSB, IMF: Progress Report on DGI
![Page 26: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/26.jpg)
Key challenges facing the DGI
• Sharing G-SIFI data across borders• Producing quarterly government finance,
sectoral balance sheets and flow of funds data
• Domestic coordination of agencies and funding them adequately
• International harmonization of reporting standards
• New data demands
![Page 27: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/27.jpg)
Legal entity identifiers (LEI)should make life easier
• Global system of unique identifiers• Initiative launched in November 2011• System now set up in record time• National implementation underway• Will facilitate counterparty risk
aggregation
![Page 28: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/28.jpg)
Greater data provision brings advantages to market participants
• Classic public good in improving market stability
• Reduce uncertainty premia, with funding and equity benefits
• Facilitate better risk management• Better pricing and monitoring of risks
![Page 29: Data Gathering and Financial Regulation](https://reader036.vdocument.in/reader036/viewer/2022070423/568167a7550346895ddcf36a/html5/thumbnails/29.jpg)
Thank you!