ECB published a paper that discusses the policy need for microdata and highlights some of the practical uses of the interlinked data. The paper sheds more light on how information in different granular databases can be combined and aggregated in a flexible manner according to different business needs. It describes in detail the process of linking through a common stable identifier, points out current limitations, and suggests a possible way forward. The paper also highlights that full integration of granular credit datasets may result in new reporting requirements to facilitate supervisory decision-making processes.
Since the financial crisis, central bank policymakers have expressed a need for more integrated microdata for monetary policy purposes and for macro-prudential and micro-prudential supervision, with a stronger focus on lending. In response to this policy need, the European System of Central Banks (ESCB) has increased the scope and quality of instrument-level data (for example, loan-by-loan) it collects. ESCB has further developed the Register of Institutions and Affiliates Data (RIAD), which is pivotal in ensuring the successful linking of the databases, because it ensures the unique identification of counterparties.
Once full integration of the granular credit datasets, such as AnaCredit, Centralized Securities Database (CSDB), and the Securities Holdings Statistics Database (SHSDB), is achieved through RIAD, policymakers will have a powerful tool at their disposal to compute exposures and indebtedness at the entity and group levels. The unique identification of both the borrower/issuer and the lender/holder will allow different risk analyses to be performed, such as the identification of excessive concentrations of investments in asset classes with common features. Many actors within the ESCB are waiting for such a tool to help them tackle challenges by exploiting the power of granular data. In this respect, new challenges could be identified and new reporting requirements may be set to collect relevant information for central banking and supervisory decision-making processes.
A possible future expansion of the reporting requirements in RIAD to also cover groups of “connected clients” would be welcome. Authorities streamlining data requests to reduce the reporting burden will have major benefits. Reporting master data to a unique, centralized platform will avoid duplication of work and reduce inconsistencies among different datasets. Granular databases require powerful IT tools to efficiently handle the huge amount of data received, stored, and analyzed. There is a demand for the easy and dynamic visualization of group structures and the overlaps and differences between the multiple group structures that RIAD can generate. It is also important that IT tools are used to further develop data quality checks to verify not only the consistency but also the plausibility of the data provided. Efforts are underway to develop such data quality checks within the ESCB. Finally, there is a need to increase the use of Legal Entity Identifiers (LEIs) to allow a high level of data standardization, thus helping users to link, analyze, and compare different data sources in a fast, automated way.
Related Link: Paper (PDF)
Keywords: Europe, EU, Banking, Statistics, Microdata, Granular Data, Macro-Prudential Policy, RIAD, AnaCredit, ESCB, SHS, Reporting, ECB
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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