Reden und Präsentationen

Es gilt das gesprochene Wort.

I. Introduction¹)

Central banks are both, extensive users as well as producers of statistics. Statistics are a core input for all their policy decisions.

The first decade of Eurosystem statistics has been a very successful one. First of all, the necessary statistical base for the common monetary policy has been set up in time and “fit for purpose” for the launch of the euro. Also during the following years a lot has been achieved in order to close data gaps and to cover new data needs. This has resulted in approximately a tripling of the data output with basically unchanged human resources. Data releases are a prime source of information not only for policy makers but also for the market participants trying to understand and to anticipate Eurosystem policies.  More than 130 million hits per year on the statistical websites of the Eurosystem central banks bear witness to this fact. After all, statistics, including central bank statistics, are public goods that should be accessible for the general public. They are an important element of the public accountability of  central banks and a solid base for evidence based policy making – something that is increasingly expected by the public.

But the Eurosystem cannot rest on its laurels. The  statistical challenges of the second decade need to be identified and to be faced. New data needs are emerging as the financial sector develops very rapidly, generating new institutions, markets and instruments. Especially the current financial turmoil has highlighted important statistical gaps. At the same time, the data requests face increasing opposition by the reporting entities and their representatives.

Thus, while the first decade was mainly characterized by the necessity to get things done in time the second decade will put more emphasis on how to do things  in the most efficient way in order to free the necessary resources for new data needs.

This will require developing new and innovative forms of cooperation both within the Eurosystem as well as with statistical institutions outside the Eurosystem. Unchartered waters will have to be entered and pioneer models.

At the same time, the last few years were characterized by a dramatic expansion of the size and importance of the financial sector. Therefore, the relevance of financial market developments – both as drivers of growth as well as potential risk factors – has been rising dramatically.

All these developments require an adequate level of knowledge about financial markets, products and institutions. The conditio sine qua non for this knowledge is reliable quantitative information, i.e. relevant statistics. Central banks producing statistics see themselves confronted with yet another “incompatible triangle” of “more, faster, and cheaper”. The dramatic expansion of financial innovations results in rising information needs for policy, due to the speed of communication and the resulting need for fast policy response data should be available almost immediately, and finally, those that have to supply the basic information, the respondents, see that as a cost factor and become increasingly “fatigue”.

This is the topic of my presentation where I will try to develop some possibilities to deal with this incompatibility in order to reduce the tensions. I will first address some of the future information needs, the issue of respondents fatigue and then sketch out some avenues to increase efficiency in the production of  Eurosystem statistics both in the longer-term as well as the short- to medium-term.

II. New data needs continue to arise

Based on their policy functions, their closeness to financial markets, their long-standing expertise and their credibility and – last but not least – the public good character of  such information – central banks are best placed to serve as the providers of such statistics, they are the natural competence centers for financial statistics.

The relevant financial phenomena to be covered by statistics are by no means static. New and more complex financial instruments are being developed at increasing speed. These instruments may either complement existing products or compete with them or may even substitute them. Parallel to that non-bank financial corporations  gain in importance. All these developments have the potential to change the transmission mechanism of monetary policy as well as the risk profiles for financial stability.

The recent financial turmoil has highlighted – among other things – an urgent need for more transparency in financial markets. Reliable and harmonized statistics are the key to transparency. Important gaps in the relevant statistical information available became apparent, gaps that need to be closed.

Especially, the correct measurement of the allocation of credit risk is incomplete or even completely lacking. The measurement of the extent and types of securitisations is also very imcomplete or not comparable.

Contingent credit exposures of banks also turned out to be more important than previously thought. They also deserve more statistical attention. What became also evident is the urgent need for harmonized data on housing markets.

The originate-and-distribute model of banking creates a need to gain further insight into credit transfers from banks to other financial institutions. New markets in products like credit default swaps and collateralised debt obligations are spreading risks and technology is enhancing trading opportunities in these instruments. The speed of financial innovation requires equally rapid reactions by statisticians in order to stay policy relevant. Therefore, the “time to market” for new statistics needs to be shortened.

Parallel to that there is a growing public demand for “evidence based policy making” and  people are increasingly interested in the underpinning evidence itself. Policy decisions will increasingly need to be based on and justified by relevant and reliable quantitative information, and the effects of policies should be tracked by data.

III. Pressure to limit the response burden

Parallel to the identified needs for further statistical information we observe a trend towards increasing “reporting fatigue”. The concurrent developments of fierce competition, the quest for shareholder value and the political drive in Europe towards a reduction of the administrative burden has led to greater attention for the costs of statistical reporting even though statistics constitute only a very limited part of the overall administrative burden.²)

Already at present some central banks have set up systems that keep the respondents’ burden to a minimum. In Austria, for instance, it was a central aspect of the development of the new balance of payments compilation system. Since the quality of the data has to be ensured nevertheless, the statisticians have to shoulder a larger share of the compilation burden. Also in the production of statistics there is “no free lunch”.

One additional avenue that might help to reduce the “perceived burden”  might be to invest into the extended return of useful information to the reporting agents so that the overall ‘net burden’ (the cost of reporting minus the usefulness of the data received back) is perceived as more tolerable.

Statistics compilers might also be helped by advances in technology. The power of the tools is steadily increasing, allowing to process and store huge amounts of data at faster speed and lower cost. Moreover, as most economic activity generates flows of information through informational networks, new technical opportunities to capture relevant data from those networks could be developed. This will require important efforts by the Eurosystem to keep up with those advances in technology, developing appropriate skills and tools in empirical economics, statistics and IT. It also represents a need for proactive cooperation with the reporting agents.

IV. Efficiency in statistics is a multidimensional challenge

There are two related concepts, namely effectiveness and efficiency. I use here a broad concept of efficiency that includes the idea of “doing the right things” as well as “doing the things right”.To achieve this we have to  define what are the “right things”, i.e. the statistics needed for the policies of the ESCB, mainly monetary policy as well as safeguarding financial stability. We need  information “fit for purpose”.

Fortunately, we do not start from scratch. Efficiency in statistics production is not a new topic for Eurosystem statisticians. A lot has been achieved during the first decade. Otherwise, it would not have been possible to meet all the challenging deadlines and to triple the statistical output, as it has been achieved.

Some of the most important elements that are already in place and play an important role that the right things are done in the right way deserve to be mentioned here:

There is the formal so called “merits-and-costs procedure” for all new or expanded statistical demands. The statisticians match the reported merits and costs and try to develop the most efficient package.

Statistical representativeness of the aggregate data does not (always) require census reporting. Since the very beginning of Eurosystem statistics methods have been used to reduce the reporting burden especially for small institutions. “Cutting off the tail” and “sampling” are methods already in use.Survey approaches are also already applied successfully by several Eurosystem countries.

Also in the area of an efficient allocation of tasks several member states have already achieved important efficiency gains. Specifically, via a formal cooperation with the respective national statistical institutes (NSIs).

In addition, statistical cooperation with banking supervision is already being successfully practiced – albeit to different degrees – in several countries.

Currently, there are also some further projects on the way with the potential to reap important efficiency gains, like the common Eurosystem effort to establish a Centralized Securities Database (CSDB).

The quest for efficiency is therefore for statisticians nothing new but already well established, maybe more so than in other areas of central banking. Nevertheless, the developments I mentioned before make it imperative that additional efficiency gains are being identified and – if feasible – implemented. 

V. The path towards further efficiency gains

The initial question to be tackled is for what kind of statistics do we want to implement eventual efficiency gains. Do we want to optimize only the production of those data required for euro area aggregates or do we plan to optimize the whole statistical production, i.e. including all the national data requirements. This will have important repercussions on the optimal solution(s) available. What needs to be avoided is to optimize the compilation of Euroarea statistics at the expense of  creating inefficiencies on a national level. Ideally, the two should go hand in hand.

V.1. The long-term vision of the statistical production process for the Eurosystem

For a long-term vision for the most efficient statistical production process in the Eurosystem we have to ask, how would a (comparable) multinational enterprise with 15 or more national subsidiaries approach such a task. The long-term vision must then be to work like one organic system that optimizes the multinational production process. Due to the existing specificities of the different national financial markets, languages, traditions as well as in order to take advantage of the closeness to the reporters this optimal system would most likely not be a centralized one but a network, with harmonized technical standards, a clear division of tasks, common infrastructures, maybe even centers of excellence and decentralized contacts with reporting agents and with data users.

It is therefore the longer term challenge for the Eurosystem’s statisticians to develop such a model or several options for such a system. Ideally it should optimize both the production of Euroarea as well as national data at the same time.

It would have to deal with all the statistical, organizational, legal, technical, as well as governance issues that need to be resolved for such a cross-country production network. Different solutions for different statistics might be conceivable.³)

As this is a rather revolutionary longer term vision its feasibility needs to be evaluated within a more limited framework as a first step. A common databank for foreign direct investments would be a rather logical candidate for  such an evaluation.

V.2. Short- to medium-term initiatives

Distinguishing the three stages of the statistical production process mentioned before – input, compilation and output – efficiency gains are potentially available and should be evaluated in order to be eventually implemented.

For the input side the goal should be that all data are collected only once. Data already available – due to whatever reasons – should be reused if found useful for (other) statistical purposes, while strictly safeguarding their confidentiality and ensuring that the sharing is legally allowed or explicitly agreed by the reporting agents. Likely candidates are existing credit registers as well as balance sheet data from balance sheet offices or supervisory information. Experience in some central banks has shown that the use of such data for statistical purposes can lead to a very significant reduction of the response burden.

On a national level, a formalized  exchange of administrative data with institutions outside the central bank like the NSIs or the tax authorities would also help to reduce the reporting costs. An important precondition would be the maintenance of common company registers with the NSI.

While supervision is not an ECB task, in several of the euro area where NCBs are nationally involved in supervision the data collection is already integrated into or linked with the statistical reporting framework. A further  alignment of potentially overlapping requirements for the data that are collected by the NCB for these purposes is needed and might be extended, where appropriate, to collaboration agreements with (outside) financial supervisors. More far-reaching collaboration steps at European level may also hinge upon the speed and intensity of further harmonisation of supervisory reporting across the EU.

For the statistical compilation phase efficiency might result from the use of modern statistical techniques. Currently, most Eurosystem statistics are collected and compiled in a way that ensures country as well as euro area representativeness. In case that only euro area data are required a use of advanced statistical techniques might have the potential to reducethe number of (credit) institutions that are obliged to report.

Substantial savings could be generated if central banks share own-developed statistical tools (i.e. software) or develop such software in common.

At the national level several statistics producers exist. Cooperation between these institutions has a lot of potential for generating synergies.⁴) An allocation of tasks according to the respective comparative advantages – central banks for financial statistics, statistical institutes for non-financial statistics – can serve both purposes, better statistics as well as avoiding any duplication of efforts. The Austrian experience of six years of such a close cooperation is an efficient model that could be copied.

The dissemination of statistics – the output – is an important integral part of the statistical production process.  Reaching more users with the same amount of data is one aspect of increasing the efficiency of the statistical production process, thus reducing the ‘cost per user’. Useful data feedback is also an important aspect for securing reliable reporting by reporting agents. At the same time, the statistical data available in the Eurosystem provides the system with a wide array of possibilities to provide services to the general public as well as to different subgroups. In addition, packaging Eurosystem statistics to serve the needs of specific target groups may benefit the public support for the Eurosystem as a whole and may also reduce the ‘perceived’ reporting burden.⁵)The system, however, needs to take a strategic decision to use proactively statistics for its communication and to accept a role as a “statistical competence centre for the euro area”. Due to its global economic importance, the Eurosystem has also a responsibility for making its statistics globally available for research purposes.

VI. Prerequisites for substantial efficiency gains

Many of the potential efficiency gains identified before are only fully achievable if the statistics producers in the euro area can cooperate to the maximum extent possible. The current legal framework – especially concerning the exchange of confidential data – is an obstacle to such an efficient solution and needs to be remedied.

A further precondition for some of the identified synergies and efficiency gains is a dialogue and a coordination of information needs between those responsible for price stability as well as macro financial stability and those in charge of supervision.

Another important aspect for the potential to exploit efficiency gains is a frank assessment of and commitment with respect to the further need for national financial data. In light of the common single monetary policy national data of publishable quality might appear to be no longer necessary. However, financial integration is still incomplete and therefore the transmission mechanism of the common monetary policy might be nationally quite diverse, thus prolonging the need for national monetary information. In addition, national economic policy making requires national data, like national balances of payments. Also for financial stability purposes national data remain crucial. However, the level of detail might differ.

Finally, efficiency gains by means of new forms of cooperation will only be possible if there is an openness for embarking on new forms of collaboration with adequate governance rules.

 The Eurosystem/ ESCB is and will be an undisputed global player in the area of monetary, exchange rate and financial stability policy. This brings responsibilities for a proper dissemination and analysis of financial data as well as the education of data users. This might help to foster and strengthen a euro area/European identity (“make Europe tangible”).

VII. Conclusions

In central banking decisions have to be made in real time and based on uncertainty. A sound statistical system serves the purpose to reduce the level of uncertainty, to lower the likelihood of suboptimal decisions.

In such a way it is money well invested into the stability of the monetary and financial system.

 The information needs of the policy makers are changing rapidly. In light of the rather limited resources available in central banks for the statistical areas and the demands for limiting the reporting burden the statistical production  needs to be as efficient as possible. Efficiency gains are mainly needed to create room for the new data demands. Optimizing these processes requires the cooperation of users,  reporting agents, legal and IT-experts.

 There is a need for a strong and continuous dialogue and cooperation of the statisticians with the analysts. The data needs of the monetary and the financial stability analysts might be rather similar. Early coordination might thus avoid the creation of a double reporting. Different demands might be justified due to different analytical needs, but that needs to be clarified and verified before statisticians approach the respondents.

Efficiency gains are achievable but they are by no means a “philosopher’s stone”. This “lapis philosophorum” is a legendary substance, supposedly capable of turning inexpensive metals into gold. Statisticians are not alchimists.

But let us show that by cooperation and collaboration within the Eurosystem as well as with other statistical producers we can achieve important efficiency gains and reduce the respondents’ burden. This should enable us to free resources for the new challenges. Let us also stop viewing  central bank statistics as a burden or pure cost factor. As Bill Poole (of the St.Louis Fed) observed recently “of all things on which we spend money in the Federal Reserve, surely the return on our data services is among the highest.” Thus, let us consider it as what it really is, namely a valuable asset, almost like gold.

Bibliography

Mayerlen, F., P. Sanders, C. Willeke (2005), Monetary Analysis in the Euro Area: Statistical Issues at Stake, ECB, unpublished.

Irving Fisher Committee on Central Bank Statistics (2008), Cooperation between Central Banks and National Statistical Institutes: the cases of Australia, Canada, and the Netherlands, IFC Working Papers No 1,