Information infrastructure for systemic regulation

Abstract

PurposeThe near‐collapse of the world's financial system in 2008 brought into focus significant limitations in the data and analysis tools available to mitigate potential risks across the financial system. It has raised calls to provide comprehensive data and adequate tools to identify and relieve systemic risk. In this paper, an infrastructure is proposed to address the need for a new information system in systemic regulation.Design/methodology/approachThe proposed infrastructure is developed using the Fed's Bank Holding Company Supervision Manual as a guideline. The model uses a data fusion approach that allows integration of inspection data, external data, and other regulatory data of different granularity. A proprietary application known as Decision Making Toolbox (DMT) is being developed with three‐tier architecture.FindingsThe integrated all‐in‐one approach will enhance the efficiency, scope, and quality of studies applied to systemic regulation and will facilitate easy decision making for effective regulation.Originality/valueThis concept integrates data and measures that are needed for systemic regulation. It facilitates easy decision making, by regulators with an integrated all‐in‐one information infrastructure, for effective regulation.