Do macroprudential tools require micro-data?
Perttu Korhonen
Bank of England
Workshop on Integrated Management of Micro-databases
Deepening Business Intelligence within Central Banks’ Statistical Systems
Porto, 21 June 2013
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Do macro tools require micro-data?
The UK regulatory framework from April 2013
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Financial Policy Committee (FPC)
– Set up at the Bank of England to complement the Monetary Policy
Committee (MPC)
– Identifies, monitors and takes action to remove or reduce systemic
risks
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Prudential Regulation Authority (PRA)
– Set up as part of the Bank of England
– Micro-prudential regulation of banks, building societies, credit
unions, insurers and major investment firms
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Financial Conduct Authority (FCA)
– Conduct and market supervisor
– Micro-prudential regulation of firms not within the PRA’s scope
Statistics and Regulatory Data Division
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The powers of the Financial Policy Committee
1. Make recommendations on a comply or explain basis to the
PRA and the FCA
2. Direct the regulators to adjust specific macroprudential tools
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Do macro tools require micro-data?
The macroprudential tools
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The Countercyclical Capital Buffer (CCB) is part of the Basel
III regime and allows the FPC to change capital requirements
above normal microprudential standards for all UK loans and
exposures
The Sectoral Capital Requirement (SCR) allows the FPC to
change the capital requirements above microprudential
standards on exposures to specific sectors that pose a risk to the
system as a whole
Data supporting these tools need to marry an economic and
financial system level perspective with a level of detail not
currently collected under any single reporting regime
Statistics and Regulatory Data Division
Do macro tools require micro-data?
Sectoral Capital Requirement (SCR)
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Three broad sectors
– Residential property
– Commercial property
– Other parts of the financial sector
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LTV classes
LTI classes
...
Instrument type
Counterparty type
...
Secured/unsecured loans,
bonds, derivatives, repos (incl.
collateral detail, ...)
Banks, BSs, investment firms,
certain fund types, monoline
insurers, SPVs, non-bank
lenders, ...
Other required dimensions:
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–
Geographical detail
Solo vs. consolidated
Trading vs. banking book
Loaned amounts vs. contingent claims
Stock vs. flow
Statistics and Regulatory Data Division
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Do macro tools require micro-data?
Why might we need micro-data for the SCR?
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Provides the flexibility required to determine the appropriate
subsectors
Enables pre-assessment of the impact
The ‘look-through’ principle requires very detailed data of the
composition of different exposures
Allows for construction of a solo level, as well as different
consolidation scopes from the same underlying data
Statistics and Regulatory Data Division
Do macro tools require micro-data?
Perttu Korhonen
perttu.korhonen@bankofengland.co.uk
+44 (0)20 7601 5212
Statistics and Regulatory Data Division
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