FAQs: Role of the NIF Value and cost How would creating a National Institute of Finance benefit the U.S. financial services industry?
| How would creating a National Institute of Finance benefit the U.S. financial services industry? |
|
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.
|