Fed Governor Tarullo Asks Congress for More Bank Data-Gathering Powers

In a hearing held by the Senate Committee on Banking, Housing & Urban Affairs on Friday, Daniel K. Tarullo, Member, Board of Governors of the Federal Reserve System, made the case that the Fed should be given enhanced ability to collect data from banks.Legislation is needed to improve the ability of regulatory agencies to collect data for supervision and systemic risk monitoring, Tarullo said. "Restrictions designed to balance the costs and benefits of data collection and analysis have not kept pace with rapid changes in the financial system," he said. For instance, the Paperwork Reduction Act requires that public notice be provided and approval of the Office of Management and Budget obtained before any information request can be made of more than nine entities. This has been a discouragement and cause of delay for regulators seeking bank data, Tarullo said. Some bank's loan books include firms' tax identification numbers as identifiers, and the ability to map those ID numbers to geographic locations or taxable income measures can help regulators with their analysis, Tarullo said. However, some firms have multiple ID numbers or a changed number, but the Internal Revenue Service usually cannot share the information needed to validate a match between the firm and the ID number.

Tarullo presented two options for the additional data gathering powers he seeks. A standalone independent data collection agency might be nimble and be able to serve all the regulators, he said. However, such an agency would incur new costs and replicate some of the existing regulatory activities, and it also would be hampered in its ability to understand the information needed to monitor systemic risks because it is removed from the regulatory process. The other alternative would be a council of financial regulators to monitor systemic risks and coordinate responses to emerging threats, a concept that is already included in some legislative proposals, Tarullo said. Each existing regulatory would receive authority to collect more data and the council would coordinate these requests. "This approach might achieve the benefits of the current arrangement and the proposed independent agency, while avoiding their drawbacks," he said. "The council would be directed to seek to resolve conflicts among the agencies in a way that would preserve nimbleness, and it could recommend that an agency develop new types of data, but it would leave the details of data collection and analysis to the agencies that are closest to the relevant firms and markets."

The Fed has already stepped up its collection of loan data from large banks, obtaining additional data on bank exposures to syndicated corporate loans to measure each bank's as well as systemic exposures to these sectors, Tarullo said. It's gathering detailed data from firms' risk-management systems to examine concentration risk and interdependencies. "Supervisors are aggregating, where possible, the banks' largest exposures to other banks, nonbank financial institutions, and corporate borrowers, which could be used to reveal large exposures to individual borrowers that the banks have in common or to assess the credit impact of a failure of a large bank on other large banks," he said. The Fed is collecting data on banks' trading and securitization risk exposures in an effort to improve regulatory capital standards in these areas.

Tarullo said the Fed is developing new analytical tools to examine such data, which may lead it to change its information requests of supervised firms.