ECB Looks to Big Data to Short-Circuit Crises

The European debt crisis, dragging on since 2009 with several member states struggling to repay or refinance government debt, has made it clear to the European Central Bank (ECB) that it needs to be able not only to anticipate potential future crises but also to react much faster when a crisis starts developing. Left scarred by its previous experience, the ECB started working on several big data projects which should help it detect earlier the warning signs and allow it to reduce the fallout of a future crisis.

Referring to the previous financial crisis, ECB Executive Board member Benoît Cœuré says “increased heterogeneity, market fragmentation and sudden turns in economic activity…made it difficult for economic policymakers to understand and assess in real time the underlying forces driving economic behavior. Both traditional statistical datasets and our models proved at times inadequate to support the decision-making process.”

In response, the central bank introduced Big Data project AnaCredit, short for “analytical credit datasets,” which gathers and analyzes loan-by- loan information on a monthly basis on credit extended by euro area banks to companies. AnaCredit is analyzing some 70 million exposures per month from loans granted by about 4,500 credit institutions to more than 15 million counterparties. The ECB has commissioned the development of a state-of- the-art IT infrastructure to cope with the workload and the required confidentiality of the data.

The first results are expected over the course of next year and should help policymakers distinguish between genuine healthy growth and potential exuberance, says Cœuré.

The ECB’s second big data initiative is money market statistical reporting (MMSR), which contains confidential daily information on the individual euro-denominated loans in the euro money market from the 52 largest euro area banks. Such loans collectively account for approximately 80-85% of the total balance sheet of euro area banks, data on some 10,000 daily transactions in the unsecured money market with a daily value of around €100 billion.

The project also includes data on 30,000 daily transactions on secured loans, worth around €500 billion. As an element of the initiative, the ECB has published the first set of euro area money market statistics, covering each of the Eurosystem’s reserve maintenance periods in 2017 for the unsecured market and the bank plans to follow up with data for the secured market in 2018.