The US House Financial Services Committee’s Subcommittee on Oversight and Investigations just concluded the hearings on how technology can be the ultimate tool to improve financial services and TARP, the American government program to purchase assets and equities from financial institutions in order to strengthen a crippled financial sector.
The focus of the discussion was on the need for a stronger database and transparency. “All around us, we see evidence that the proper use of technology can generate immensely valuable results while at the same time improving efficiency and reducing costs,” said Dilil Krishna, a specialist in risk and financial management for Teradata financial services, during his testimony. “Technology has advanced to the point where the oversight of large, complex financial enterprises is now feasible,” Krishna said. “In fact, large organizations around the globe routinely use technology for financial risk management. One of the key areas in this regard is in the management of risk data and analytics.”
Unfortunately, strong data management skills were not enough. Financial institutions and data recovery firms must guarantee another key factor in the game: transparency and trust. Without these two elements, there is no way financial data can be put to good use. What happened in the 2008 financial meltdown was that banks stopped trusting each other because of the unveiling of plies of fake analytic results, of fake or blown-up financial data and information. At the height of Lehman Brothers’ collapse, no one trusted the financial products of others any more. Every bank, every find, every asset manager was just trying to sniff out what other surreal inventory or toxic asset they will have to face around the next corner. Credit stopped flowing and the whole system basically seized, and licked its wounds.
By employing technology that can deliver greater transparency, financial regulators will be able to have a better feeling and stronger monitoring over the real situation, and spotting irregularities and scams will eventually become easier.
Krishna adds that building greater transparency is not as far away and unachievable as it sounds: “Examples of relative transparency are all around us. Every day, financial analysts and ordinary investors rely on financial reports issued by companies. An even more practical example is the implicit belief we all have that the account statements we receive from our bank accurately reflect the balance of all our transactions.”
Keeping up with issuing and demanding clear statements and balances is every player’s right and responsibility. And will always be cheaper and easier to handle than multi-billion dollar cracks and hundreds of people being fired overnight. Again, proper data management seems to become the focus of more and more core fields of today’s world.
