1. AnaCredit A zoom lens at credit and credit risk in the euro area
Riccardo Bonci
AnaCredit team
ECB - DG-Statistics
Div. Monetary & Financial Statistics
ECMI Lunchtime Seminar “Removing Information Barriers to Investment in SMEs" Brussels, 8 February 2017
DISCLAIMER: The views and opinions expressed in this presentation are those of the author and do not necessarily represent official policy or position of the ECB.

2. Motivation: why is AnaCredit needed? Basic features of the project
Topics addressed in this presentation
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Motivation: why is AnaCredit needed?
Basic features of the project
Main steps achieved and challenges ahead
Potential impact on credit assessment

3. Why is AnaCredit so important for the ECB?
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Good policy making is based on reliable and timely data
The financial crisis has shown that there is large heterogeneity in data availability among and within countries and sectors
Aggregated data do not fully cover the new tasks and data needs
Just the tip of the iceberg
Urgent need for granular datasets allowing timely and flexible use to support (unconventional) monetary policy, macro-prudential policy
What is underneath the aggregates?
Aggregate
data
Granular data

4. Better analysis of SMEs’ financing conditions
AnaCredit usage: concrete examples (1/2)
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Better analysis of SMEs’ financing conditions
Detailed and timely information about provision of credit to SMEs: disentangle credit demand and credit supply effects
to possibly complement and cross-check qualitative information obtained via the SAFE survey
Assist the assessment of the effectiveness of various (standard and non-standard) measures to improve SMEs access to credit
e.g. how is the liquidity provided to banks eventually channelled to SMEs?
Enhance monitoring of credit developments at borrower-lender level
e.g. do bank-firm relationships matter for financing conditions? 4

5. The ‘transmission’ of ECB monetary policy
AnaCredit usage: concrete examples (2/2)
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The ‘transmission’ of ECB monetary policy
Currently, only broad quantification of policy effects available using aggregate data
e.g. quarterly estimates of loans to NFCs by economic activity and monthly data on (new) ‘small’ loans to NFCs  just a proxy for loans to SMEs
Monthly harmonised granular data in AnaCredit will address:
Heterogeneity of loans data collected and estimations
Lack of loans data by size of enterprises
Accurate classification of loans by sector of economic activity
Quality and frequency of existing loan data estimations 5

6. Strong request from users, in a cost-conscious approach
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Governing Council
Micro-prudential supervision
Monetary policy
Statistics
Market operations
Research
Financial Stability/Macroprudential
National Central Banks
Risk management
European Systemic Risk Board
European Commission
Credit institutions
European Banking Authority
Public at large
Users / tasks
Access to credit (esp. SMEs)
Off-site and on-site supervision
Transmission channels
Calibrate and validate an ‘ICAS’
Financial constraints
Credit worthiness [foremost for reporting agents]
Stress-tests
Early warning systems
Others…
Analyses
strong requirements for different policy-making bodies
carefully assessed against associated costs of data collection: merits and costs procedure, open consultation
with the continuous involvement of the industry

7. Pros of collecting granular information
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Surveys
limited coverage, low comparability
often run ad hoc to address urgent needs, no/limited time series
expensive, for both reporting agents and central banks
Aggregated data
individual institutions combine their positions and transactions into a limited set of statistics/indicators
well established, broad coverage, relatively limited costs of reporting
long lead time (years) to address ever changing policy needs
Granular data
instrument-by-instrument and counterparty-by-counterparty
more informative: more sophisticated analysis, address heterogeneity
flexible: meet ever-changing user needs in a timely manner
cost-effective: high set-up costs more than offset by running savings in the medium-term, also for banks!
Aggregated data can be derived from granular data

8. AnaCredit  Analytical Credit Datasets
The AnaCredit endeavour: basic features
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AnaCredit  Analytical Credit Datasets
Multipurpose set of harmonised granular data on credit and credit risk
What? bank loans to legal entities above €25,000 e.g. non-financial corporations or governments (not households)
When? as of September 2018 (ref. period)
Who? all banks in the euro area (incl. resident foreign branches)
For whom? several central banking purposes and numerous users, both internal and external
Legal basis? ECB Regulation adopted on 18 May 2016 (ECB/2016/13)

9. Main achievements and ongoing initiatives
ECB Regulation adopted on 18 May 2016 (ECB/2016/13)
AnaCredit Manual to support reporting agents in their reporting
Part I published on 10 Nov. 2016
Part II to be published in Q1 2017
Part III (with case studies) in April 2017
Support to reporting institutions both from ECB team and via NCBs
AnaCredit-Support
Q&A section on the ECB website
Validation checks clearly communicated
Continuous dialogue with the industry: Meetings, s, Written comments on the draft Manual, etc.
Compliant with Banks’ Integrated Reporting Dictionary – BIRD

10. (As you well know!) financial intermediation is complex
Challenges for credit institutions with cross-border activity (1/2)
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(As you well know!) financial intermediation is complex
Instruments – multipurpose contracts
Counterparties – lenders, borrowers, guarantors, etc.
Protection – collaterals, guarantees, credit derivatives
Relationships – foreign branches, banking groups, syndicated loans, joint debtors, connected clients, etc.
Creditor L1
Creditor L2
Debtor D1
Instrument I1
Debtor D2
Credit Risk CR1
Instrument I2
Credit Risk CR2
Credit Risk CR3
Col. / Guar. C1
Col. / Guar. C2

11. Challenges for credit institutions with cross-border activity (2/2)
Credit institutions with cross-boarder activities will probably report to different NCBs via their (euro area) various branches and subsidiaries
NCBs will coordinate with each other to avoid double reporting Still some duplication may happen in the early years
Based on harmonised set of definitions, AnaCredit reporting and standards will – to a large extent – be the same across countries
big advantage of standardisation
high benefits also for banks in first place, thanks to the possibility to assess (cross-border) risk exposure in an integrated way
AnaCredit leverages on granular data produced by banks for their internal processes

12. Potential use of AnaCredit for credit assessment
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In general, no granular information (loan-/borrower-/lender level) will be disclosed, whether anonymised or not
ECB will not offer any credit scorings re: e.g. individual SMEs
ECB will not distort competition in the market of credit information
AnaCredit sets standards on important credit variables/dimensions
Market-led initiatives could build upon these standards and data quality esp. as originators will report on this basis

13. ECB-UNRESTRICTED
FINAL
Thank you!
Questions

14. New tasks and new data needs from the financial crisis
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Phase A - post Lehman Brothers – Sept 2008
banks’ rescue, government guarantees
Who holds GR, IE, PT government debt?
Phase B – May 2010
Sovereign debt crisis and again banking crisis
How exposed are euro area investors?
Phase C - May 2012
Banking Union announced
2008
2009
2010
2011
2012
2013
2014
2015
2016
EU Financial Supervision
ESAs/ESRB - Nov 2010
How big are
EU financial inter-linkages?
ECB’s banking supervision – Nov 2014
How healthy are euro area banks?
Single Resolution Mechanism – Jan 2015
Single Resolution Fund – Jan 2016

15. Available granular data is hardly comparable across countries
Wide range of information on credit and credit risk data is already available throughout the EU
Central Credit Registers (CCRs)
Private Credit Bureaus
aggregate statistics
surveys
But such datasets are largely heterogeneous across countries
available in many, but not all countries
different coverage - instruments, lenders and borrowers population, time period covered, reporting threshold, etc.
different concepts and definitions , e.g. firm size, valuation principle
different level of detail loan-by-loan, borrower-by-borrower

16. Public Credit Register Private Credit Bureau(s)
Current availability of granular credit information in Europe
Country
Public Credit Register
Private Credit Bureau(s)
Austria X
Belgium
Cyprus X 
Czech Republic
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Netherlands
Poland
Portugal
Spain
Sweden UK
Credit Reporting Systems
per country (indicative list)
Source: European Credit Research Institute

17. Examples of questions to be answered with AnaCredit
MFI interest rate statistics show a significant cross-country divergence in cost of short-term borrowing for firms after the crisis, in part still persisting
What are the reasons for this heterogeneity?
Are firms more risky, i.e. have a higher probability of default, in some countries?
Are firms in certain sectors of activity more risky than others, hence countries where such sectors are dominant experience high average borrowing costs?
Does it depend on the bank-firm relationship e.g. small vs large banks lending to smaller/larger firms?
Do some countries have more new or innovative firms, which are normally charged with higher rates because their credit worthiness is difficult to assess?
Are SMEs facing similar conditions as large firms?
Aggregated credit developments may underpin different analyses and results
To know the true story we need AnaCredit
Bank interest rate statistics
Interest rate on short-term loans to NFCs up to an amount of EUR 1 million (percentages per annum)

18. Process overview: main milestones
ESCB initiative launched by STC and FSC in March 2012
Decision ECB/2014/6 approved by Governing Council on 24 Feb. 2014
Organisation of preparatory measures for the NCBs and the ECB
Commitment to establish a ‘common’ granular dataset on credit and credit risk
Tool for monitoring of progress achieved  STC annual progress report
Merits & Costs exercise since 2000, input to statistical Regulations
Costs assessment (May 2014) for NCBs and Reporting agents
Merits assessment (Sept. 2014) priorities based on 95 business cases
Close cooperation with the banking sector
Regular contacts with reporting agents via NCBs: fact-finding and cost assessment
presentations to/meeting with the industry e.g. EBF already from 2012
Reporting Manual: Part I published on 10 November 2016, Part II in March
Legal framework – Regulation ECB/2016/13
Approved by the GovC on 18 May 2016; with discretion left to NCBs
Draft Guideline (addressed to NCBs) work in progress

19. Basic content of the AnaCredit dataset
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88 attributes to assess the credit intermediation
Counterparties:
Who is who?
Identification of creditors and debtors
Characterisation: e.g. size, sector of economic activity
Balance sheet status
What?
Classify exposures by type (e.g. type of product) and use (e.g. securitisation)
Needed for internal consistency: avoid double counting (e.g. joint liabilities)
Exposure features
What (in greater detail)?
Classify the exposures for analytical purposes (e.g. maturity, interest rate)
Risk measure
Will it happen?
Provide a forward-looking view (e.g. probability of default)
Valuation
How much?
Book values, nominal values, market values
Loss measure, provisions; allow for a backward-looking view