Meeting ECB users´ demands in a rapidly changing environment Steven KEUNING* Director General Statistics, European Central Bank Abstract. This note discusses ways to respond to ECB user’s demands, both by statistical functions of the European System of Central Banks and by the European Statistical System. First, it describes how the ESCB responds to demands for new regular statistics with a prior assessment of their expected merits and costs. Furthermore, a number of possible flexible approaches are explored to cope with the limitations of the regulatory framework. Next, it is noted that the ESCB in general and the ECB in particular are among the most intensive users of ESS statistics. While it is recognised that the needs for ECB decision-making are typically quite ambitious, any unrealistic expectations of ECB users are already curtailed in advance by the ECB’s DG Statistics, which also tries to convert the remaining needs into achievable objectives for the ESS. Finally, a better utilisation of the ECOFIN Conclusions on the EFC Status Reports is suggested. 1. Introduction The Directorate-General Statistics (DG-S) of the European Central Bank (ECB) develops, compiles and disseminates the statistics, the statistical indicators and the metadata required for monetary policy and the other ECB tasks. ECB statistics ultimately serve decision-making. In other words, the needs of the ECB decision-making bodies determine which statistics to provide. While DG-S aims at achieving, in the most effective manner, the best quality and availability of ECB statistics and other euro area statistics that are needed for the ECB decision-making, at the same time it carefully balances the merits and costs, particularly of new statistics, also taking due account of the objective to minimise the reporting burden. The demands by policy-makers were recently well illustrated by Jürgen Stark, Member of the Executive Board of the ECB, in his speech delivered at the 4th ECB Conference on Statistics [1]: “…our experience at the ECB has been that better data in one field does not permit any scaling down of effort in improving data in other areas. On the contrary, in the face of the constant and evolving challenges posed to monetary policy makers, better data simply facilitates the necessary deeper, broader and richer analysis that is always required in order to take decisions that can serve the ECB’s mandate .”; “(…) statisticians and reporting agents know all too well that economists and policy makers’ data requirements are, in principle, inexhaustible. The * The contributions of Alda Morais and Violetta Damia to this note are gratefully acknowledged. Jean-Marc Israël, Patrick Sandars, Caroline Willeke and Nicole de Windt provided valuable comments on an earlier version. merits and costs procedure adopted by the Governing Council to assess new statistical regulations reflects the need to cap this insatiable demand .” Section 2 describes how DG-S responds to demands for new regular statistics by ECB policy- makers with a prior assessment of their expected merits and costs. This is a requirement before any new regular statistical data collection is enshrined in a binding ECB Regulation, which is directly addressed to all reporting agents in the euro area. In Section 3, the note proposes a few flexible approaches to cope with some limitations of this regulatory framework. Section 4 concludes with an overview of the role of the ECB’s DG-Statistics as a broker between European System of Central Banks (ESCB) users and European Statistical System (ESS) producers of statistics. 2. Balancing the demand for and supply of the ECB’s own statistics The development of euro area statistics since the start of EMU has been impressive. The euro area statistics currently produced by DG-S fall into three wide groups: 1) monetary and financial statistics, including balance sheets of financial corporations, bank interest rates, securities issues and yield curves; 2) balance of payments, international investment position, effective exchange rates and other external statistics; and 3) financial accounts, euro area non-financial accounts, and some government finance and general economic statistics. [2] The latter are only compiled as long as the ESS does not provide them (e.g. residential property prices). Despite the wide range of datasets now available in these three broad groups, there is still room for improvement. Indeed, in a dynamic economic and financial environment, statistical frameworks have to continuously evolve in order to remain fit for purpose. At the same time, resource constraints on the part of both respondents and compilers have to be taken into account. Against this background, the ECB Statistics Quality Framework and quality assurance procedures [3] include a well-defined merits and costs assessment that accompanies the identification of new statistical requirements and the development of new or substantially enhanced statistics. Frequent contacts between statisticians and user areas at all levels, including regular co-ordination meetings, provide for an ongoing dialogue and help to identify future needs at an early stage. In addition, DG-S has a high-level, medium-term work programme [4] and prepares a rather detailed annual work programme, in close cooperation with the user areas. This work programme also updates the medium-term prospects for each of the about 50 ‘product groups’ of DG-S. In addition, the ESCB Statistics Committee (STC) has a medium-term work programme and it also approves its own annual work programme and that of its working groups. Overall, it is ensured that the ESCB’s statistical functions are well aware of user requirements. This process is greatly aided by the fact 2 that the main users of central bank statistics are in-house, and that the decision-making bodies are both the ultimate users and the providers of the resources. In general, new requirements for enhanced ESCB statistics can be grouped into three main categories: simple fine-tuning measures (e.g. introducing seasonal adjustment for formerly non- adjusted time series), “short-term approaches” (based on existing, often unharmonised data sources), and the establishment of new or substantially enhanced euro area-wide statistics with a significant impact on respondents. In the latter case, the ECB typically acts by means of an ECB legal act, and strives for stable reporting requirements for five years, with a review thereafter. To date, such a review has occurred once and led to an extension of the reporting requirements. The follow-up given to each of the three above-mentioned types of new requirements varies. While the fine-tuning measures are only included in the internal ECB work programmes, short-term approaches are prepared in the relevant ESCB working groups and normally decided upon by the STC. Finally, new legal requirements addressed to reporting agents are channelled via a so-called “merits and costs procedure”, which was introduced by the Governing Council of the ECB in 2000 and further enhanced in 2002. Its objective is to ensure that the statistics required with a high priority are collected, compiled and disseminated, but with a minimum reporting burden and on the basis of a cost-effective compilation process, in accordance with the “Public commitment with respect to the ESCB’s statistical function” [5] . It entails an in-depth discussion within the ESCB and with other stakeholders, including representatives of the financial industry, More specifically, the current merits and costs procedure consists of the following main stages: a) An initial assessment is carried out, including consultations with NCBs and possibly respondents, to determine whether, or not, new requirements can be met using existing statistics. b) A fact-finding may be used to analyse (partly through contact with respondents) the feasibility, significance and methodological aspects of specific requirements. c) A selection of reporting agents, the NCBs (and possibly other statistical institutions) and the ECB assess the costs of the envisaged new statistics according to a grading scheme – ranging from 1 (limited cost increase) to 5 (very large cost increase), and distinguishing between implementation costs and recurrent costs. 3 d) Main users of the statistics under development 1 are asked for a qualitative and quantitative assessment of the merits of various options to fulfil their requirements. The quantitative assessment is based on a set of scores for criteria such as policy relevance, operational usefulness, international harmonisation, data quality enhancement to already existing statistics and usefulness for analyses. e) Merits and costs are matched in preparation of the final decision by the Governing Council of the ECB. This balancing of users’ needs and producers’ costs inevitably includes a substantial element of judgment. Any kind of cost-effectiveness analysis can only provide support to what is ultimately a policy decision. As in any cost-benefit analysis, the costs of decisions that are not evidence-based or based on incomplete or even wrong statistics need to be considered as well. The overall experience so far with the merits and costs procedure has been positive. This procedure helps to establish priorities and facilitates more disciplined discussions with users and respondents. It typically leads to the dropping of initial requirements that have a somewhat lower priority and/or would lead to a very high cost increase. As the procedure has a cost in itself and significantly