Government of India Volume I: Analysis and Recommendations

SYSTEMIC RISK
filings by financial firms. It must be noted however that regulators and agencies will continue
to collect any data that they require until the FDMC is fully functional. The FDMC will
also contain public domain data from the economy at large, as appropriate.
Once the FDMC is operationalised each regulated entity will only submit all regulatory
data through the database. Further, each regulatory agency will only be allowed to access
the data it is authorised to collect from the entities that it regulates, to ensure that there is
no widespread access by all regulatory agencies to a regulated entity’s data. This access
will be governed by memoranda of understanding that the members will enter into with
the FSDC and the FDMC.
Table of Recommendations 9.5 The Financial Data Management Centre
◮ The FDMC will work within the FSDC as the sole electronic system for the collection of data from financial
entities for regulatory reporting and supervision;
◮ All decisions on the nature of information to be collected will be entirely within the domain of individual
regulatory agencies;
◮ The FDMC staff will merely aggregate the data and provide access to the regulators. All vetting and review of
such data, and requests for additional information will continue to be done by the individual regulators; and
◮ The FSDC would be empowered to enter into memoranda of understanding with other regulators such as the
CCI or other statutory agencies associated with the financial system for increasing the ambit of a centralised
data collection, transmission and warehousing function.
To preserve data confidentiality, the FSDC’s use of the data in the FDMC will be governed
by the draft Code. It is envisaged that where the FSDC is required to obtain information
from unregulated financial entities, it will be able to do so; however requests for
data by the FSDC must necessarily be in consonance with it’s objectives. There will be
legal procedures, grounded in principles of due process and regulatory governance that
will guide the request for such data by the FSDC.
It is envisaged that anonymised data from the FDMC (which will not contravene confidentiality
or privacy concerns or other law) may be made available for access to research
bodies and members of the public to foster greater analysis and research relating to the
financial system.
The FDMC would represent the first accretion of information on a financial system
scale in India. With this data in hand, the FSDC would conduct a research programme
on the problems of monitoring and mitigating systemic risk, through the identification
of system-wide trends. In addition, the FDMC would also reduce the burden of multiple
filings by financial firms, and promote a more efficient system of regulatory information
gathering. Many benefits accrue from creating an FDMC, including de-duplication of
regulatory filings, lower costs of compliance for firms, and standardisation of regulatory
data standards. Members of the public and research bodies will also be able to access
anonymised data to foster greater analysis and research of the financial system.
The operations of the FDMC are defined in Table 9.5.
It is evident that there will be considerable challenges that the FSDC would face while
trying to conduct this research programme. The patterns of systemic risk in India are likely
to differ considerably when compared with the experiences of more developed countries,
which limits the portability of knowledge and ideas from those settings. Additionally, policy
and scholarly understanding of systemic risk is relatively underdeveloped to the extent
that actions to develop these databases have begun as recently as 2010 in countries
such as the US. The FSDC would have to undertake special efforts in ensuring that the research
programme has adequate capabilities and meets the desired end. The research
programme must:
1. Identify the interconnectedness of, and systemic risk concerns in, the financial system;
94 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION