What is MMSR?
The Money Market Statistical Reporting (MMSR) regime is the European Central Bank’s (ECB) official and only source of data on daily money market transactions. Accurate reporting of this statistical information is crucial for decision-making at the ECB. This data provides a view of not just collateralised but also the unsecured, FX swaps & overnight index swaps (OIS) elements of the money markets.
Why is it important?
The ECB has been particularly keen on monitoring and regulating this aspect of the market, as it directly impacts economic activity across Europe. The regulator relies on MMSR reports to make informed decisions on monetary policy, financial stability, financial regulations and more importantly, the daily Euro benchmark computation of €STR (European Short-Term Rate).
One of its measurements so far has been the withdrawal of the ECB’s quantitative easing. As the ECB scaled down its bond-buying programme, market participants watched the impact of the decision by tracking the money markets performance.
What are the consequences of getting it wrong?
The ECB requires financial institutions to report their data promptly, accurately, and transparently. Additionally, the legislation states the requirement that all statistical data reported is:
“…tested frequently and adequate data quality checks are implemented by the reporting.”
If a discrepancy is found, the ECB can impose fines on the institution responsible, ultimately holding them accountable for their actions.
“ECB and the NCBs carry out frequent data quality checks on submitted reports to assess and question the quality and consistency of the data; Appropriate internal testing procedures and health checks of trading and reporting systems; Early detection of failures and gaps in reporting flows.” Reporting Instructions for the Electronic Transmission of Money Market Statistical Reporting (MMSR), version 3.5. (20 December 2021)
The repercussions of inaccurate reporting are severe for firms and also have broader long-lasting effects on trust and stability within the financial markets. These issues range from simple errors in reporting to more complicated instances of data misrepresentation.
Any small discrepancy in reported values can have a ripple effect that can cause significant damage to the economy and the financial industry.
When testing our clients’ data we see a number of common errors occurring:
- Enormously high or irrelevant haircuts and spreads
- Erroneous rates, cash and nominal fields misinterpretation
- Misreporting on collateral indicators and collateralisation values.
These errors can lead to a distortion of the true state of the market and paints a completely different picture, undermining the existence of such data-driven and effective benchmark reporting in first place.
How Kaizen can help
Financial institutions should regularly test their data to ascertain the production of accurate results. Kaizen’s ReportShield™ quality assurance services have been developed by former regulators and industry specialists to provide firms with robust controls including continuous independent testing and validation of submitted data. Our testing is unique because we test every single data field on every report, so firms can be confident that they’re receiving a comprehensive assessment of their reporting quality.
One of our mantras is ‘don’t mark your own homework’ when it comes to your regulatory reporting data. Using an independent specialist provider gives for far greater rigour than what can be achieved internally.
Our services include:
- Accuracy Testing of all reported data to identify issues and errors
- Advanced reconciliations performed and deployed on each platform/segment to ensure completeness
- Subject matter expert support to review reporting solutions and control frameworks
- Training on MMSR requirements which can be tailored to your firm.
Failure to report accurate statistical data creates risk of regulatory fines and reputational damage for the firm involved jeopardising the stability of financial markets. It’s crucial for firms to prioritise the importance of achieving maximum accuracy in their MMSR reporting, both to ensure that the economic environment remains stable and robust in the long run and to avoid serious consequences for the firm. Investment in assurance activities will provide significant cost savings as well as reducing regulatory risks.