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What is the fundamental value proposition of the NIF? |
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The fundamental benefits of the NIF are three-fold: It will improve the efficiency and effectiveness of financial regulation; it will reduce the likelihood of systemic crises and costly institutional failures; and it will consequently increase public confidence and trust in our financial markets. |
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Last Updated on Thursday, 24 September 2009 21:42 |
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Doesn't the U.S. Federal Government already have plenty of economists? Why do we need this? |
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No institution presently has the capacity and mandate to gather comprehensive data, and to conduct the applied research needed to safeguard the financial system against systemic risk. Managing systemic risk in a timely and comprehensive manner is a different challenge from those regulators have addressed in the past. Meeting this challenge will require novel interdisciplinary collaboration among experts in statistics, applied mathematics, operations research, network analysis and computer science, as well as financial economics. The data and analytic needs will be significant and the NIF will take advantage of economies of scale in staffing and computing resources in ways that our individual, focused regulators cannot.
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Last Updated on Thursday, 26 November 2009 19:45 |
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How would creating a National Institute of Finance benefit the U.S. financial services industry? |
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A National Institute of Finance would benefit the U.S. financial services industry in three ways: It would reduce operating costs. Standardizing data reporting will dramatically reduce back office costs (costs associated with verifying details of trades with counter parties) and costs associated with maintaining reference databases (legal entity and financial instrument databases). Morgan Stanley estimates that implementation of the NIF will result in 20% to 30% savings in operational costs. It would improve risk management. By requiring daily reporting of all positions to the NIF, firms will be able to present a complete picture of their positions to their own internal their risk management groups. This will in turn ensure that senior management has a consistent and clear understanding of the firm's exposures – particularly their exposure to different counterparties during times of economic stress. It would create a safer and more competitive market. By helping improve individual firm risk management and providing better tools to the regulators to monitor and oversee systemic risk, the U.S. financial markets will be made safer, and will attract more business than competitors that are more prone to major shocks or collapses during times of economic stress. |
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Last Updated on Friday, 27 November 2009 08:08 |
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