Call for national reference data respository to combat systemic risk

Call for national reference data respository to combat systemic risk

The American Statistical Association (ASA), as well as the EDM Council, have endorsed a petition to create a new US Federal agency to build and oversee a centralised utility for maintaining reference and trade data.

The proposed National Institute of Finance (NIF), will act as an independent federal agency and will maintain a national repository of financial transaction and entity position data. Its goal is to offer the analytical capacity to take full advantage of that information as well as ensure that disparate regulatory authorities are not acting on proprietary stores of financial data.

A central respository of, not only reference and trade position data, but standardsed data has long been on the wish list of many data managers within financial services. The current economic crisis has rasied the call for better and more sophisticated risk management, especially management that looks out for clues to causes of systemic risk. Trade data and reference data is now being seen as an essential tool for unravelling toxic assets and examining systemic risk.

The EDM Council's chairman Mike Atkin has also sent a letter encouraging those within the risk and data management industries to sign the petition to create the agency. "The good news is that the NIF is gaining serious traction among legislators and key regulators. The EDM Council is contributing to this initiative in order to maximise our collective effectiveness in the competition for the ear of Congress as it debates the make-up of the new regulatory environment" writes Atkin.

However, he adds: "We do have our fingers in the dike of reality....We recognise this is a broad initiative and that politics is an inexact and unpredictable business. But based on the NIF's recent outreach, exposure and engagement, I believe this effort has gained significant momentum."

The NIF would have the authority to gather appropriate data and provide the analytical capabilities necessary to monitor systemic risk, to perform independent risk assessments of individual financial entities, and to provide advice on the financial system to the Federal regulatory agencies and the United States Congress, according to the ASA. The Institute would be organised under the proposed Systemic Risk Regulator and would provide data management and statistical services to the financial and regulatory communities. As conceived, the NIF's duties would not overlap those of any existing financial regulatory agency.

The NIF would have two principal organisational components:

  • The Federal Financial Data Center (FFDC)
  • The Federal Financial Research and Analysis Center (FFRAC)

The FFDC would collect, clean, maintain and secure all data necessary to carry out its purpose. Since data alone do not constitute useful information, the FFRAC would provide to regulatory agencies and policy makers independent statistical capabilities and computing resources to carry out their purpose.

The NIF was conceived by a group of private citizens who formed the Committee to Establish the National Institute of Finance. Atkin describes this group as "a coalition of industry, academia, and other interested parties." Committee members are working to have the NIF included as a critical component of the upcoming restructuring of financial regulation legislation in the House and/or Senate.

The petition to establish the NIF can be found here.

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