Quality, Depth and Managing Burden
Wise words from the Chair of the Supervisory Board of the European Central Bank, Mme. Danièle Nouy, who closed out last week’s ECB Statistics conference with a number of important points. First, the entire process of financial supervision is grounded in high quality information that comes from regulated firms. She said, in part: “We rely on supervisory data in all aspects of our daily work. We rely on them to create risk profiles of banks and we rely on them to analyse a bank’s liquidity and its capital. Data underpin our judgement, our decisions and our actions.”
Second, she points out that this is a virtuous circle – firms need data too. “Good data help banks to take good decisions; bad data leave them with blind spots, which might prompt bad decisions.”
Third, “the quality of the data as such opens a window into the state of a bank. We even use a data quality index and data quality dashboards to understand the weaknesses in a bank’s reporting.” The quality measures she is talking about here include a range of metrics. For example, some look at timeliness trends and overall compliance with reporting requirements. Others review the relative quality of individual returns, based on the results of business rule tests, stack-ranked against peers and the long term trend for the institution in question. It is a disciplined area that is continuously improved by the ECB and other major regulators.
Finally, controlling burden is a key concern. The major tools? “Three relevant actions here are to standardise, integrate and harmonise reporting.”