Speech by Danièle Nouy, Chair of the Supervisory Board of the ECB,
Seventh ECB Statistics Conference “Towards the banking Union. Opportunities and challenges for statistics”,
Frankfurt am Main, 15 October 2014
Ladies and gentlemen,
Let me warmly thank you for your attendance at, and valuable contributions to, the seventh ECB Statistics Conference. Please allow me to make a few concluding remarks before the end of this successful event. It has been my pleasure to participate in this conference for the first time as Chair of the Supervisory Board and I greatly appreciate this opportunity to address such a distinguished audience.
Banking Union: Challenges and opportunities
The Banking Union constitutes a milestone in the reinforcement of the institutional framework in the euro area. It will be the driver for achieving a most wanted objective since the beginning of the financial crisis: boosting the confidence of citizens and markets in the resilience of the banks under our supervision. And statistics, data play a crucial role for this aim.
Confidence in the banking system arises from a positive perception of its robustness; but our senses cannot directly assess this robustness. In order to assess how sound a bank, or a banking system, is, we need data, we need statistics.
I have stated on a number of occasions that European banks are much better than what markets perceive. The failure to provide full transparency of the banking institutions has been precisely one driver to this misperception.
The so-called pillar 3 of the Basel Accord aims to encourage market discipline by developing a set of disclosure requirements which shall allow market participants to assess key pieces of information on the capital adequacy of institutions. There is hence already information publicly available that should help to improve transparency. Nevertheless, currently it is not yet possible to access this information in a quick and harmonised way. This results in difficulties for the markets to compare the health of banks, and reduces the efficiency of market discipline.
Lack of transparency is also due to very quick changes in the complexity of the world: In the last two decades we have been witnessing a technological shock that has dramatically increased the complexity of the world, especially of the financial system. Interactions between financial agents have become much more global and frequent. The possibility generated by vastly increased computational powers allows us to do very difficult calculations in a short time thus contributing to the creation of complex financial instruments. The oversight of the financial sector requires, more than ever, accurate data with high frequency and quick availability.
Banks themselves are also suffering from the insufficient transparency. Not only because of the misperception in the markets, but also because of the unsatisfactory coordination of the national initiatives to improve the situation. Banking institutions active at European level face the problem of needing to comply with an increasing panoply of regulations and, more specifically in the statistical field, different reporting requirements and definitions of concepts. The European Banking Authority (EBA) has already started to work on the harmonisation of data requirements and definitions for supervisory reporting. But banks do not only compile supervisory information: Harmonisation of data requirements should include other domains, like monetary policy, national accounts or market operations.
We face very relevant challenges, and the Banking Union shall serve as a catalyst for achieving the necessary improvements. There is no doubt that the integration in one institution, the ECB, of different domains related to the euro area banking system paves the way for enhancing the statistical function within the European banking system. Nevertheless, ECB and EBA should collaborate for achieving a modern reporting environment for banks, increasing the availability of public as well as confidential data and its quality, while helping to alleviate the reporting burden.
Summary of the conference contents
So statisticians have a very challenging task on the horizon, but let me express my confidence in their success: Statisticians know what they have to do; this conference has clearly showed it.
Presenters have successfully analysed the challenges we are facing, and have included very relevant proposals.
In this context, there is a question that has been repeatedly addressed in the presentations: Integration in its many aspects. You have had the opportunity to hear the experience of some European countries that are heading towards an integrated statistical approach, where collection, production and dissemination of data is centralised and performed indistinctly of the final information purpose.
You have heard and discussed ideas like the use of micro data or the design of multipurpose reporting frameworks. This approach should lead to increasing the reliability of information and the overall efficiency of the statistical process, while reducing the burden for reporting institutions. It seems thus clear that integration is a win-win solution; statisticians should continue to work on it.
You also had the opportunity to discuss, during the third session, how, the micro and the macro perspectives interact. Although there are different perspectives from which we need to analyse banks (like macro prudential, micro prudential or monetary), they all have the same underlying reality: the banks and their business. This idea links again with the previous concepts related to integration, which should ensure that the different sets of information we analyse, depending on the perspective, are consistent.
Learning from the experience of the Federal Reserve has been a very valuable and inspiring added value of the conference. The Fed is facing similar challenges to those we have within the Banking Union, and we have seen that it is working on solutions based on similar ideas as those presented by European authorities. In this respect, I would like to highlight three of the proposed ideas: the concept of transforming the data culture, the idea of developing best-practices for data governance and management, and the need for global communities to address our common challenges.
The last topic of the conference was dealing with communication. Data is information and information exists to be communicated. But communication of statistics can be a very complex and delicate issue, as the experience with the new standards for national accounts shows. Statistics need to be communicated to a variety of audiences, which do not have in all the cases the technical background to fully understand them. If we manage to create good data but we fail to communicate their meaning, the final objective of statistics – but also of supervision - might, at least partly, fail.
The world is rapidly evolving and the banking system is quickly adapting to this evolution. Data, statistics, is the basic material for assessing these changes. If statistical practices do not evolve at the same speed, we will find ourselves unable to properly analyse reality.
This conference has shown some of the recent developments that different authorities have applied in order to enhance their capacity to create statistics. It has been made clear that we need accurate and timely data for analysing the reality of the banking system. Only holistic strategies, across countries and domains of interest, will lead us to really improve our current status. We have to overcome silos, in data collections and data banks but also in the minds, and create an integrated picture.
There are at the moment a number of activities aimed at enhancing such statistical integration. I have already mentioned the EBA, which has harmonised supervisory data collection among EU countries. But that is not the only European development: Currently there are working groups trying to further harmonise reporting requirements to banks (e.g. by creating a European Reporting Framework), or to create a common statistical dictionary of financial concepts.
And there are other initiatives at a more international level aiming to enhance the use of standards in statistics, some of them well-known from many years, like the United Nations System of National Accounts or the initiative by the Financial Stability Board.
Integration, harmonisation and standardisation are necessary conditions, although not sufficient for achieving a fully satisfactory degree of transparency for the banking system: We also need to properly disseminate and communicate the data. In that sense, creating a common repository (“European Hub”) for publicly available data could be a relatively simple task with a very important and positive impact.
In this moment, the statistical world is facing many challenges and there are still many things to do. The Banking Union shall serve as a catalyst for the very relevant improvements we all expect.
I recently wrote that I cannot promise that the ECB can once and for all eliminate the risk of another financial crisis. But ECB is equipped to minimise this risk. And statistics play a crucial role here. Remember that the inability to correctly measure and analyse the risks associated to banking activity was one of the reasons of the current financial crisis. Developing and communicating accurate and timely statistics is essential for avoiding the repetition of this failure in the future. For that reason, we all, persons and institutions involved in the banking statistical process, reporters, regulators, statisticians and supervisors, share a common responsibility towards society. Let’s keep on working in the construction of a more solid ground for the future of the financial system.
Thank you very much for your interest, attention and attendance.