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Global coordination of capital market regulations and data requirements - Resilience of the EU financial sector in the global context
The road to data Damascus (or perdition)
By Gavell Stefan - Global Head of Regulatory, Industry and Government Affairs, State Street Corporation
The 2009 G-20 Data Gaps Initiative (DGI-1) was a post-crisis “road to Damascus” moment, taking us beyond repairing faults exposed during the crisis towards a forward-looking identification of emerging systemic risks. Has the initiative lived up to its promise? Or are we at risk of a “road to perdition”?
The volume of new information on systemic risk collected is impressive. GSIBs provide significant quantities of data to the BIS via their regulators. Large data volumes on financial instruments and activities – derivatives, Structured Products, fund activities, and securities financing transactions – are collected by a multiplicity of regulators.
But the labor intensive and inconsistent processes used to produce much of this data are creating risk that the G-20 effort will not live up to its potential. As we move to the next stage of the FSB initiative – such as DGI-2 – data quality and consistency need to be a top priority.
There is good news here – the groundwork is being laid for data consistency, starting with the Legal Entity Identifier, which is already being used in 195 countries for over 415,000 entities. And CPMI and IOSCO have shown great initiative in seeking consensus on a Unique Product Identifier and Unique Transaction Identifier for derivatives reporting. The promise of blockchain technology may create the ability to distribute data market activity, widely, consistently and instantaneously.
Getting the most out of these initiatives, which are running concurrently but at different speeds and through different regulatory bodies, requires increased coordination between government, industry and standard-setters to avoid overwhelming market participants with well-intentioned but inconsistent demands.
The ultimate prize is worth it if we can cut through the thicket: maybe not quite a “road to Damascus” conversion, but the promise of lower costs, increased transparency, and a fuller understanding of emerging systemic risks will benefit us all.