The importance of data quality and rigorous reporting in order to mitigate systemic financial risk across markets should not be underestimated, according to European Securities and Markets Authority (ESMA) chair Verena Ross in a speech to the Eurofi High Level Seminar.
“In a world that runs on data, good quality data is also the essential ingredient to effective risk analysis,” Ross said, speaking to financial ministers, regulators, and practitioners.
She added, “Detailed reporting requirements now constitute a key component of financial sector legislation. I know many firms complain about the burden of these reporting requirements, but – let me assure you – this data allows ESMA and national regulators to better understand risks and scrutinise market activity.”
Ross confirmed plans to continue streamlining data reporting and improve ESMA’s data capabilities. She said they will put “every effort to enhance data-driven risk analysis, policy making and supervision in the EU.”
Alexander Dorfmann, senior product manager, SIX said, “As the local regulators begin to shift their focus from just demanding data consistency, to seeking both data consistency and quality, now is the time for financial institutions to reassess.”
He added, “There’s certainly signs that financial institutions are adopting a more consolidated approach, as they begin to re-evaluate what more can be done with their reference and market data. It is not hard to see why. Embracing a standardised, more scalable data service which enables firms to extract the reference and pricing information needed for each regulation is an obvious next step.”
Ross also highlighted the key role that central counterparties (CCPs) play in cushioning rather than exacerbating shocks in the financial markets.
During the stress period in March 2020, she said they dealt successfully with record volumes of clearing and settlement activity. However, “in view of the systemic importance of CCPs for the EU as a whole, we must continue to think about the risks stemming from our reliance on CCPs outside the Union as well as the appropriateness of the current supervisory framework within,” she added.
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