Statistical findings on the new Money Market Statistical Reporting ECB-UNRESTRICTED FINAL Statistical findings on the new Money Market Statistical Reporting Gemma Agostoni Josep Maria Puigvert ECB Ronald Rühmkorf Plamen Petrunov BNB Conference of European Statistics Stakeholders Budapest | 20 - 21 October 2016

Overview 1 MMSR in a nutshell 2 ECB-UNRESTRICTED FINAL 1 MMSR in a nutshell 2 The data in details: variables and attributes 3 Implementation and Standardisation 4 Validation procedures 5 Reporting since April 2016 6 MMSR additional data quality challenges 7 Conclusion Initial statistical findings on the new MMSR

MMSR in a nutshell (1/3) ECB-UNRESTRICTED FINAL The money market changed dramatically in the wake of the crisis modified market patterns and fragmentation financial innovations and regulatory changes affecting participants’ behaviour and markets salient features Consequences data gaps hindered to interpret on a very timely basis money market- related elements of the monetary policy transmission mechanism Proposed solution collect granular statistical information on money markets to support and better inform monetary policy conduct in euro area New legal act MMSR Regulation (ECB/2014/48) adopted on 26.11.2014 Initial statistical findings on the new MMSR

MMSR in a nutshell (2/3) ECB-UNRESTRICTED FINAL Transaction-by-transaction data on four money market segments: Secured: borrowing/lending of cash secured with a collateral which safeguard the lender against borrower's default Unsecured: borrowing/lending of cash backed only by the borrower’s creditworthiness FX Swaps: purchasing/selling of foreign exchange against EUR OIS: exchange of EONIA rate against a fixed interest rate Daily frequency: Reporting by 7 a.m. on the day following the trade date and covering all money market trades conducted during the previous day Timeline: Full reporting as of 1 July 2016, following a 3-month interim period Initial statistical findings on the new MMSR

MMSR in a nutshell (3/3) Reporting population ECB-UNRESTRICTED FINAL Reporting population The biggest 52 euro area MFIs with a balance sheet larger than 0.35 % compared to the total balance sheet of all euro area MFIs The high correlation between the bank balance sheet and the money market activity ensured achieving coverage of ca. 85% of the money market Highest money market concentration - around 80% - for reporting agents located in Germany, France, Italy and Spain Counterparty coverage (with whom reporting agents are trading) MFIs, i.e. interbank market Central Banks and General Government Other Financials Corporations, incl. Investment funds, Insurance, Securitisation “Wholesale” Non-Financial Corp.s classified under Basel 3 LCR framework Initial statistical findings on the new MMSR

The data in details: variables and attributes ECB-UNRESTRICTED FINAL Main money market variables Valuation Interest rates | Basis Point Spread | Price | Swap points Turnover Transaction Nominal Amount Counterparty identification LEI : Legal Entity Identifier (for interbank and CCPs) ISO 17442, or Sector, via ESA2010 code, and Location, via ISO 3166 country code Maturity structure Trade Date Settlement Date Maturity Date Contract creation Payment Termination Collateral identification ISIN : International Securities Identification Number, via ISO 6166, or Asset Type : CFI code, via ISO 10962, and Issuer Sector via ESA2010 code Initial statistical findings on the new MMSR

Implementation and Standardisation (1/2) ECB-UNRESTRICTED FINAL Documentation Detailed Reporting Instructions (published a year in advance) explaining the conceptual and technical specifics of the MMSR framework An extensive Q&A document further elaborating on the reporting requirements Clear and well-defined XML - Reporting schemas => Ensuring correct and common understanding among reporting agents Strong interaction with the industry 3 mock-up data exercises conducted in 2015 to test the understanding of the reporting framework and readiness by the 52 Reporting Banks Several meetings with the Banking industry concerned In Dec. 2014, Feb. 2015, Dec. 2015, May 2016 and Nov. 2016 Fully automated processing: from data transmission to dissemination Initial statistical findings on the new MMSR

Implementation and Standardisation (2/2) ECB-UNRESTRICTED FINAL High level of standardisation MMSR framework is fully aligned with the ISO 20022 standard ISO 20022 Universal financial industry message scheme is a single standardisation approach (methodology, process, repository) used in many fields of financial reporting, such as payments or securities Strongly supporting high automation of the MMSR data collection and processing for Reporting Agents as well as for the Eurosystem MMSR Reporting Instructions fully consistent with all ISO definitions and XML-based reporting messages registered by the ISO making them globally recognised Usage of the ISO 20022 standard Bank of England’s Sterling Money Market Daily (SMMD) – equivalent of the MMSR covering the UK money markets Secured Financed Transactions-Data Store (SFT-DS) under the SFT Regulation Initial statistical findings on the new MMSR

Validation procedures ECB-UNRESTRICTED FINAL Data Quality Checks Provided as a detailed document to the reporting agents to ensure transparency and easiness of the implementation on their side Applied immediately after data reception Scope compliance with formats consistency of the information plausibility of the data Follow-up automatic, system-generated message to the reporting agent presenting a detailed explanation of the breached DQ Check(s) the Eurosystem message requires response and corrective measures by the reporting agent ASAP, but not later than 10 days Initial statistical findings on the new MMSR

Reporting since April 2016 (1/2) Evolution April–Oct. 2016 of weekly average nb of transactional records Over  4,500,000 transactional records in total, thus far

Reporting since April 2016 (2/2) Evolution of percentage of accepted, of which with warnings, and rejected transactional records: over 99% of the records accepted and <1% rejected!

MMSR additional data quality challenges (1/3) Further data quality analysis is also being conducted to identify: Matching of the two legs of transactions (among 52 reporting agents) per segment to identify possible missing transactions Currently only checked on a monthly basis Analysis of the counterparty based on Counterparty sector or the LEI E.g. transactions reported with the LEI, instead of the sector and location (when not a bank or CCP) Analysis of foreign exchange forward points, basis point spread, haircut and exchange spot rate to identify wrongly reported fields

MMSR additional data quality challenges (2/3) Outlier detection

MMSR additional data quality challenges (3/3) Wrong reporting around “0” for a particular agent Initial statistical findings on the new MMSR

Conclusions MMSR: an already positive outcome ECB-UNRESTRICTED FINAL MMSR: an already positive outcome Timetable and actual delivery fully on time and above expected quality level New data collection at very high frequency (daily) and timeliness (day + 1 at 7:00) and granularity ensuring high coverage on money market segments Standardisation, data validation and active preparation guaranteed a high quality dataset and mitigated the reporting burden on the industry Full automated processing improving the effectiveness and lowering the costs A very rich source of information serving many purposes among the Eurosystem, the industry and the public at large Remaining challenges ahead Further improvement of data quality: in particular outlier detection, clustering and multivariate analysis External and internal dissemination of the data, fully protecting confidentiality Future extension of the reporting population Initial statistical findings on the new MMSR