Institute for Financial Transparency

Shining a light on the opaque corners of finance


ECB highlights the importance of transparency

It its quest to understand how its monetary policies are transmitted to the real economy, the European Central Bank is turning to transparency.

Specifically, the ECB  is seeking far greater disclosure from pension funds.

The ECB will ask large, autonomous funds in the euro zone to start reporting according to harmonized rules with more data also released to the public, it said in new draft guidelines that are still subject to a consultation with the industry.

The funds, …, will have to list transactions security by security, and provide data on both assets and liabilities, broken down by economic sector, maturity and geography.

If pension funds have to provide this level of disclosure to the ECB and the public, why not banks?  After all, banks are also integral to the transmission of monetary policies to the real economy.

And why is this level of detail needed?

“It will help us better understand their role in the transmission mechanism of monetary policy because we will… see not just how the stocks are changing but what are they buying or what are they selling, so how do they react to our monetary policy,” said Aurel Schubert, head of the ECB’s statistics unit.

Of course, this level of disclosure is also needed from banks if investors are to assess the risk of the banks.