FAQs related to the size of the NIF, its financing, and the feasibility of the project.
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How large would the National Institute of Finance become? |
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The National Institute of Finance must have the analytic and computational resources needed to measure and monitor systemic risk throughout the financial system, investigate disruptions and changes in risk patterns, and conduct the long-term research needed to support effective systemic risk regulation. The only definitive way to gain a clear picture of system-wide risk will be through large-scale scenario analysis of the financial system and by modeling, at a fine level, how the system responds to a wide-range of shocks. The computational resources needed would be roughly in line with the current, non-classified, high performance computing facility at the Oak Ridge National Laboratory. The staffing and budget for the NIF, when it is fully functioning, would be a substantial fraction of those at existing financial regulatory agencies, such as the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, or the Securities and Exchange Commission. |
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Last Updated on Friday, 27 November 2009 08:03 |
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Is such a large data collection effort feasible? |
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While data volume was once a serious practical concern, the low cost and high performance of modern data processing and storage systems render this concern largely obsolete. The volumes of data handled by the NIF will be comparable to those handled today routinely by existing government agencies such as the National Weather Service. |
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Last Updated on Friday, 27 November 2009 08:45 |
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How would the costs of the NIF get paid for? Would it require higher taxes? |
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As proposed, the NIF would be funded through assessments on the financial institutions that report data to the NIF. Reporting institutions would realize efficiencies from the use of centrally maintained and universally accepted data standards. As proposed, the NIF would not increase the burdens on U.S. taxpayers, nor increase the federal deficit. |
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Last Updated on Friday, 27 November 2009 18:12 |
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Why would the NIF be funded with non-appropriated funds? |
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There is a well established precedent in the federal government that agencies involved in the regulation and monitoring of financial firms and markets are funded through assessments placed on the regulated firms. Funding the NIF in this way yields three principle benefits. The first is that the taxpayers would not be burdened with paying the budgetary costs for the NIF. The second is that financial firms will realize significant reductions in operating expenses as a result of the standardization of data systems that will be a core responsibility of the NIF. It would not be fair for the taxpayers to absorb the cost for this effort and then have the financial firms reap all of the financial benefits. The third is that Congress has recognized that attracting the special skills needed to perform this work requires being able to pay salaries that are above the standard civil service pay scale. Funding the NIF with non-appropriated funds makes it possible to pay more competitive salaries. |
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Last Updated on Friday, 27 November 2009 18:12 |
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The NIF proposal is ambitious. Is this too much to bite off all at once? |
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The NIF will not begin its work in a vacuum: it will build on a large base of established work related to data systems and analytics which are important to understanding systemic risk. Indeed, a substantial part of the NIF's development process will involve the integration of existing operational and prototype systems that have already been created in the regulatory, academic, financial and information technology communities. Leveraging these existing efforts will help to ensure the efficient, effective, and timely operation of the NIF. |
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Last Updated on Thursday, 26 November 2009 19:57 |
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Does the government have any track record of success in data collection efforts like the NIF? |
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The Interactive Data Project of the Securities and Exchange Commission (SEC) and the modernized Call Report system of the Federal Financial Institutions Examination Council (FFIEC) are two examples of existing initiatives that require financial firms to submit data in standardized formats. Both are both widely viewed as successful initiatives that were implemented sensibly, in stages, without imposing undue or unreasonable burdens on reporting firms. The NIF would build on the expertise and experience regulators have developed through initiatives such as these. |
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Last Updated on Friday, 20 November 2009 07:26 |
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Can the government really do this? |
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The effort and level of expertise required to establish and maintain the National Institute of Finance will be comparable to those needed for existing large-scale federal entities such as the National Weather Service, Oak Ridge National Laboratory, or Lawrence Livermore National Laboratory. The capacity to develop and maintain the NIF lie well inside the demonstrated capabilities of the U.S. Federal government. |
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Last Updated on Friday, 20 November 2009 07:16 |
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Which functions of the NIF would be outsourced to third parties? Which functions would be maintained in-house? |
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Every operating organization – whether government agencies, businesses, and not-for-profit entities—faces the question of whether to perform an activity “in-house” or whether to “outsource” it. The federal government has well established policies and procedures for making such decisions. The one key distinction for the federal government is that certain things which are “inherently government functions” may not be outsourced. These established policies and procedures would be applied by the NIF to determine the most efficient way to perform its responsibilities and which things should be done “in-house” and which, if any, would be “outsourced.” |
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Last Updated on Wednesday, 09 December 2009 18:04 |
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