benoit cœure : addressing global data availability challenges panel remarks by mr benoit cœure, member of the executive board of the european central bank, at the eurofi financial forum 2015, luxembourg, 10 september 2015. * * * it is a great pleasure for me to participate in this panel alongside such distinguished fellow speakers. i will share with you my views on remaining data gaps. the closing of those gaps is essential for the ecb ’ s conduct of monetary policy and the effective implementation of the ecb ’ s micro - prudential, macro - prudential and financial market oversight functions. i will also briefly touch on the important subjects of data sharing and data transparency. however, let me first point out that there are a number of ongoing international initiatives aimed at improving the information frameworks on which key policy decisions are based. these have largely been driven by the data gaps initiative ( dgi ) launched in april 2009, which supports several g20 projects, such as bilateral and multilateral surveillance, and initiatives focusing on global systemically important financial institutions. 1 as a member of the inter - agency group on economic and financial statistics, the ecb has been deeply involved in the development and implementation of these recommendations and strongly supports the second phase of this initiative ( dgi - 2 ). in this context, i would like to mention three important achievements. first, the ecb has introduced new statistics on securities holdings. these provide very detailed insight into who holds which securities in the euro area. 2 second, earlier this year, the ecb, together with the bis and the imf, published a “ handbook on securities statistics ”. this enables the collection of better securities data by clarifying concepts and providing guidance on the harmonised presentation of securities data. third, the recent ecb regulation on supervisory financial information, which will gradually extend reporting requirements to entities that have not yet been reporting on the basis of finrep, is one example of where we have closed a data gap and increased the consistency of data at the same time. despite this encouraging progress, serious data gaps, inconsistencies and inefficiencies still exist in several major policy and supervisory fields. allow me to briefly mention a few key examples. in the field of credit, significant data gaps still exist. the availability of complete and granular credit register information and corresponding risk parameters is critical in order to assess the concentration of exposure throughout each banking group across relevant dimensions. the absence of this information makes it

creditors, and default losses are absorbed by a large number of investors. second, the emergence of powerful non - bank players to whom risk is transferred contributes to greater risk dispersion and market efficiency. one example is hedge funds, which have become large risk absorbers on credit markets. their share in derivative trading is estimated at up to 25 %. hedge funds trade mainly on the riskiest segments and often buy equity tranches of cdos, previously the preserve of banks. another example is institutional investors ( mutual funds and pension funds, insurance companies, etc. ), which have increased their exposure to risk transfer instruments, even though their investment policies remain fairly conservative. third, banks themselves may, via credit derivatives, improve their risk management. they diversify their risk profiles by gaining exposure to companies or sectors in which they do not have customer relationships and by hedging risks while retaining customer relationships. credit risk transfer mechanisms are also used by banks to deal with single - name concentration risk. consequently, major improvements in risk measurement have been made. from a prudential viewpoint, the basel ii framework takes better account of risk mitigation techniques employed by banks, including the use of credit risk derivatives, and applies specific treatment to securitisation. 2. but this evolution should make us more – not less – vigilant regarding the assessment and tracking of risks. the wider benefits that crt can bring should not give rise to a false sense of security. risks do not disappear as a consequence of their transfer. banks need to pay attention both to " residual risks " ( e. g. tail or extreme event risks ) and all of the risks ( e. g. operational risk, documentation and settlement risk, legal risk ) arising from the use of crt. furthermore, the growing complexity and volume of crt transactions call for enhanced monitoring. actually, understanding where risk ultimately lies and how risky exposures can build up is an essential prerequisite for safeguarding financial stability. the argument is fourfold : first, historically low interest rates and abundant liquidity have prompted an intense search for yield. lower interest rates have encouraged risk - taking and higher leverage as investors have wanted to secure high rates of return. a case in point is insurance companies, which have to service guaranteed rates of return, and pension funds that have agreed to specific benefits. as the return on risk free bonds has declined, investors have been increasingly led to search for yield and increase the share of risky assets, including