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Fixing financial data to assess systemic risk

Economic Studies at Brookings – Fixing financial data to assess systemic risk, Greg Feldberg, Research Scholar, Yale School of Management: “The COVID-19 market disruption again highlighted the flaws in the data that the public and the authorities use to assess risks in the financial system. We don’t have the right data, we can’t analyze the data we do have, and there are all sorts of holes. Amidst extreme uncertainty in times like this, market participants need better data to manage their risks, just as policymakers need better data to calibrate their crisis interventions. This paper argues that the new administration should make it a priority to fix financial regulatory data, starting during the transition. The incoming administration should, first, emphasize data when vetting candidates for top financial regulatory positions. Every agency head should recognize the problem and the roles they must play in the solution. They should recognize how the Evidence Act of 2018 and other recent legislation help define those roles. And every agency head should recognize the role of the Office of Financial Research (OFR) within the regulatory community. Only the OFR has the mandate and experience to provide the necessary leadership to address these problems. The incoming administration should empower the OFR to do its job and coordinate a systemwide financial data strategy, working with the regulators. That strategy should set a path for identifying key data gaps that impede risk analysis; setting data standards; sharing data securely, among authorities and with the public; and embracing new technologies that make it possible to manage data far more efficiently and securely than ever before. These are ambitious goals, but the administration may be able to accomplish them with vision and leadership.”

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