Augustín Carstens of BIS Speaks on Challenges Toward Meeting Data Gaps

Mr. Carstens summarized the progress made since the crisis, outlining the lessons learned so far, along with the current and upcoming challenges. BIS work suggests that aggregate data are most useful for identifying the build-up of emerging risk and that financial strains are best measured in consolidated statistics. In sharp contrast to 10 years ago, the interconnections between G-SIBs are now known to supervisors while a growing share of OTC derivatives and repo trades are centrally cleared and recorded. The availability of such data does not replace asking hard questions in daily supervisory practice, but it certainly facilitates decision-making in a crisis. Granular data must be collected, structured, and analyzed before they can be relied on for critical policy decisions. International sharing of data and analytical results has also improved with the establishment of supervisory colleges, the European Single Supervisory Mechanism, and the International Data Hub. Moreover, data coming out of the data gaps initiative are increasingly used to support financial stability analysis and macro-prudential policy at the national and international levels.

Next, he outlined the challenges that still remain for statisticians and policymakers, despite the considerable progress. He highlighted that identifying financial stability risks in this environment of next-generation fintech, cyber-security threats, and cryptoassets will require new efforts. Policymakers should seek to imagine the many ways in which technological change may disrupt core financial system functions and collect the corresponding data. One area is the potential erosion of credit standards as new underwriting procedures and mechanisms of certification take hold. Another is the uncertain liquidity implications of algorithmic trading and other technologies. Yet another area is the possible threat to the integrity of payment systems as the use of digital currencies expands. To stay abreast of new developments, it will be necessary to collect and share novel types of data, such as a register of cyber-attacks, or data on external cloud service providers. Expanded data collection needs to go hand in hand with scenario analysis. Integrated risk assessments should focus on multiple sources of threats. In the supervisory context, that would entail running a broad range of scenarios for stress tests, knowing that any single scenario represents but one small part of an infinite range of possible futures.

He emphasized that the combination of enhanced regulation, supervision, and information-sharing will help better prepare the financial system for the next financial crisis. Due to the international efforts in regulatory reform and the associated statistical initiatives, the core financial system is now more resilient than a decade ago. However, despite best efforts to have better data available, attempts to identify risks in real time will invariably fall short. Future booms and busts will come in new guises. Central banks should thus continue to remain alert and to probe areas that have the potential to undermine the stability of the financial system. With the aid of suptech, regtech, and datatech (refers to the range of innovations applying artificial intelligence, machine learning, and other automated processes to collect, process, analyze, and disseminate official statistics), "we should focus not only on closing known data gaps, but also on expanding information frontiers—extending our knowledge base so as to better prepare ourselves for future developments." He concluded that it is necessary to cultivate the ability to better match data collection to the information needs and to make better sense of the collected data.

Related Link: Speech

Keywords: International, Banking, Data Gaps Initiative, Fintech, Regtech, Suptech, Datatech, Cyber Risk, Financial Stability, Statistics, BIS