On 13 July 2022, the European Systemic Risk Board (ESRB) published a letter to Commissioner Mairead McGuinness covering persistently poor data quality and the risks that this poses for financial stability.

The letter highlights the difficulties that persistent data quality issues pose for the adequate monitoring of financial stability risks and how they may relate to underlying risk management problems. More specifically, poor data quality:

  • Impedes the adequate monitoring of (financial stability) risks by authorities, which was one of the goals of the post-crisis reforms.
  • Compels policymakers to devote substantial resources and time to follow up on data quality.
  • Creates blind spots due to the exclusion of entities reporting implausible values from monitoring.
  • May be symptomatic of a more fundamental problem of poor risk management among certain reporting entities.

The letter contains proposals to address these issues and at the same time to strengthen the supervisory framework for central clearing in the EU and increase the attractiveness of EU clearing.