Office of Financial Research (“OFR”) Director Richard Berner gave a speech at the Financial Regulation Summit. His remarks concerned the ways in which the development of standards can improve financial data and transparency.
According to Director Berner, gaps in analysis, data and policy tools can lead to the inability to address weaknesses in the financial system. He explained that standards, such as the global legal entity identifier (“LEI”), are needed to produce high-quality data, and added that the OFR has asked regulators to require a broader use of the LEI in regulatory reporting, as well as the broad adoption of standards for instruments and products as they become available.
Additionally, Director Berner announced that the OFR is developing plans for a reference database for financial instruments. He stated that this database should not compete with those of private firms, nonprofits and academic institutions; rather, these other products should be included in the OFR database’s design so that all of the systems can work together.
Director Berner also mentioned that the OFR entered into a partnership with the Board of Governors of the Federal Reserve System to fill gaps in data that describe repurchase agreements. For the first time, he said, the OFR is going directly to the industry to collect financial market information, and the results will be evident in this collaborative project.
Lofchie Comment: At some point, the demand for information from multiple government entities becomes a drag on the economy. It’s a variation on the Heisenberg Uncertainty Principle (the more precisely the position of some particle is determined, the less precisely its momentum can be known); i.e., the more substantial the energy expended to report on work that has been done, the less substantial the work that can be done. Perhaps this phenomenon should be named the “Watched-Pot Analytic Syndrome.”