Mario Draghi: Statistics to deliver price stability and mitigate systemic risk
Speech by Mr Mario Draghi, President of the European Central Bank, at the Sixth ECB
Statistics Conference, Frankfurt am Main, 17 April 2012.
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Ladies and gentlemen,
On behalf of the Executive Board I would like to welcome you to our sixth biennial European
Central Bank (ECB) statistics conference. I am very pleased to see that the event has once
more attracted many distinguished participants.
Let me take the opportunity to share with you some thoughts on the topics on the agenda.
As policy-makers in the fields of monetary policy and financial stability, we are deeply
dependent on the work being done to maintain a stream of timely, relevant and reliable data.
Today and tomorrow you will have the opportunity to discuss ways of further strengthening
the information basis for the fulfilment of the mandates given to the ECB and the European
Systemic Risk Board (ESRB).
Key challenges
The financial crisis has dramatically increased the need for very timely granular data. And it
has led to a rethinking of a number of organisational and conceptual aspects in statistics.
To give just one example, the traditional monetary statistics derived from individual banks'
balance sheets are insufficient to gather information on financial groups that operate across
borders and through non-bank subsidiaries. This is because the monetary statistics cover
only the euro area and do not focus on the various kinds of risk to which banks are exposed
and the adequacy of their capital in view of these risks. This means that it is vital to collect
data consolidated at the level of banking groups or insurance groups.
Some of these data are already available at the national level for micro-supervisory
purposes, but they are not always comparable across countries. The ECB, the ESRB and the
three new European supervisory authorities (ESAs) are all working to fill remaining data gaps
and to meet the challenge of timely, frequent and high-quality data for their macro-prudential
functions.
Moreover, there is an increasing need to consider measures of dispersion not just averages,
and to consider micro data as well as macro aggregates. For financial stability purposes, in
particular, a wider variety of granular data and indicators are needed, and more emphasis
needs to be put on data "outliers" and so-called "tail risks".
As we have learned, systemic risk may stem from any part of the financial system, including
the shadow banking sector. That is why we also need more data to monitor unregulated
financial institutions and markets.
In recent years, significant steps have been taken to identify the data gaps and to fill them by
gathering more and more detailed quantitative information. But we are just at the beginning
of this process, and I know that statisticians are all too well aware of the fact that the data
perimeter may change again in the future.
It is vital that the work done at the European Union level is consistent with the worldwide
dimension. In 2009, the G20 endorsed a report on "The Financial Crisis and Information
Gaps". That report contains 20 high-level recommendations on the measurement of risks in
the financial sector, international financial linkages and the communication of official
statistics.
Quite some progress has been made in the implementation of these recommendations. For
example, accounts for economic sectors, statistics on securities, and the Principal Global
Indicators website supported by seven international organisations, including the ECB. But it
is still necessary to continue with these efforts, in particular on quarterly government finance
statistics and on the FSB common template for systemically important global financial
institutions. And the transposition of the new rules into all national legal systems needs to
proceed swiftly.
The role of statisticians
Going beyond the pure data challenges, the statistical community is still coming to grips with
the fact that their work is now more than ever in the spotlight of public debate. "Statistical
errors" were once something in which only specialists were really interested. Now, they can
receive headline coverage, sometimes even more so than everything else coming out of both
official and non-official statistical sources.
Public scrutiny is good for statistics but it also brings new challenges for statisticians.
Alongside their more traditional role of collecting data and assisting in the correct
interpretation of data, statisticians also need now to be more involved in the communication
of results - to the markets, to the media and to the wider public. The role of dashboards and
the narrative use of data are examples of tools where the input of statisticians is clearly
essential.
Selected ECB statistical initiatives to fill data gaps
Together with the rest of the Eurosystem, the ECB is undertaking a number of important
statistical initiatives to support fulfilment of the ECB's mandate to deliver price stability and
the ESRB's mandate to mitigate systemic risk. The initiatives will also help other
policy-makers and decision-makers.
Let me briefly mention three of these initiatives:
First, the Eurosystem is developing a Securities Holdings Statistics database. The financial
crisis has highlighted the lack of transparency in a number of financial markets as well as
difficulties in assessing financial exposures and linkages between institutions. Securities
holdings represent a field where exposures are often concentrated, and a lack of sufficiently
comprehensive, consistent and granular information has been identified.
The aim of developing a detailed dataset on securities holdings is to combine holdings of
large players in the euro area with information on the individual issuers across the world.
This will provide a potentially very useful tool for both monetary policy and macro-prudential
analysis.
Second, the Eurosystem has been extending its database to provide more detailed
information on the activities of financial institutions and instruments. This covers more
detailed balance sheet information on banks but also on investment funds, insurance
corporations and pension funds. Complex securitisation operations, which played a major
role in the financial crisis, are reflected in new data on the activity of financial vehicles
resident in the euro area.
Information on who is lending to whom in the euro area economy can help us to understand
the process of financial intermediation better. It is now published on a quarterly basis in the
matrix of the integrated sector accounts. The provision of quarterly information on
cross-border holdings of financial assets and liabilities by euro area residents allows users to
detect cross-border exposures.
Third, the Eurosystem is amending its statistical legal acts to align its economic and financial
statistics with the recently revised international statistical standards. These revised standards
aim at achieving consistency between domestic sector accounts and statistics for the rest of
the world. This consistency will give users a much more complete view of inter-linkages
between the rest of the world and the domestic sectors of the economy.
Reporting burdens
The ECB is well aware that closing information gaps requires significant efforts by all parties
involved - the statisticians, the reporting agents and the data users. It is also clear now more
than ever that a lack of good quality information on which to base decisions can be far more
costly to society than the collection of new, additional data.
In any case, all data collections by the Eurosystem are subject to a prior, strict "merits and
cost" procedure. Importantly too, there is a strong emphasis on ensuring that there are no
double collections of the same information by different statistical authorities and that, as far
as possible, existing information serves multiple purposes.
These data collections must be detailed and comprehensive enough to meet various current
and potentially future statistical needs. When banks or other agents report the raw data, the
compilation of aggregates and distribution measures for monetary policy, macro-prudential
and other statistical purposes can be done by the respective statisticians and be used for
several purposes. The reporting agents thus can be spared these compilation
exercises - saving them resources and cost.
Of course, this requires effective coordination between the various statistical authorities to
ensure their data needs are matched. As an example, the ECB is working with the ESRB and
the ESAs aiming to achieve the highest possible coordination and synergies with regard to
data for supervisory purposes, macro-prudential analysis and monetary policy.
A good example of this is the recent collaboration of the European System of Central Banks
and the European Banking Authority (EBA) through the Joint Expert Group on Reconciliation
of credit institutions' statistical and supervisory reporting requirements. The second edition of
the group's report has just been published on the websites of the ECB and the EBA.
The problems faced in such initiatives are often very complex, and progress takes time. For
example, as supervisory data on consolidated group structures are currently not fully
harmonised within the European Union, efforts are needed to make these data comparable
across countries and time. The quality and timeliness of such data requires efficient data
transmission and processing between different organisations.
Confidentiality
One of the thorniest issues in such coordinated activities concerns the confidentiality of
individual data, and supervisory data in particular.
The protection of confidentiality is sacrosanct for all statistical activities. It is enshrined in the
relevant legal texts of the ECB and it is central in standard practices for all official statistics.
Where "Chinese walls" need to exist, they are strictly respected. Reporting agents should
know and should have the right to know where the confidential information they are providing
is to be used.
But a big effort is needed to ensure the harmonisation of divergent practices in the protection
of data and sometimes conflicting legal texts in the different fields of competence and in
different countries.
Restrictive "blanket" confidentiality rules that cover all types of information, irrespective of
whether there are real risks of a breach of confidentiality, are often counterproductive. They
end up not only being damaging to information sharing and disclosure, but also to the real
protection of confidentiality where and when this is needed. These rules confuse what is truly
confidential and what needs strong protection with what is possibly market sensitive or what
is simply inconvenient.
So here is yet another area of activity on which statisticians and legal experts need to focus.
They need to ensure that legal frameworks and existing practices find the right balance
between the need for confidentiality and the possibility of data sharing.
Conclusion
Let me conclude. As I hope all of my remarks have illustrated, statistics is a core activity of
policy-making, and central banking in particular. Right now, it is also a highly dynamic
activity.
I personally attach great importance to progress in the areas I have mentioned. I am
convinced that your discussions today and tomorrow will offer valuable contributions on how
best to face the challenges and how to take advantage of the opportunities.
Producing high-quality statistics on the financial sector remains a core task of a central bank.
It is a central input not only for decision-making processes but also for the communication of
our decisions, and thus, for the credibility of our actions.
In light of these challenges, the central bank statisticians of the future will have to serve both
areas - the pursuit of price stability as well as the support of financial stability.
I wish you a very fruitful conference and very much look forward to the results of your
deliberations.
Thank you for your attention.