A Financial Data Management Centre (FDMC) is to be created as a statutory body as recommended by the Financial Sector Legislative Reforms Commission (FSLRC). FDMC will be a repository of all financial regulatory data, to enable standardization of Data across the financial sector and providing analytical support to Financial Stability and Development Council (FSDC) on issues related to financial stability of the economy and matters connected therewith. It will assist in conducting research on systemic risk and system-wide trends, and facilitate a discussion about policy alternatives between the members of the FSDC.
The report of the committee to study the financial data management legal framework in India has been made public on Thursday, the 29th of December, 2016 that suggests the passage of a Bill in Parliament, ”the Financial Data Management Centre Bill 2016”, to create the statutory body, as had been proposed by Finance Minister Arun Jaitley in the Budget speech of 2016-17 .
Objective & Functions
As per FSLRC report, key objective of the FSDC is to strengthen the stability of financial system by identifying, monitoring and mitigating systemic risks. The systemic risk regulation is a five element process, of which the first four will be performed by the FSDC and the fifth element will involve assisting the Ministry of Finance (MOF) with crisis management. The five elements of the process are:
- Data, research and analysis.
- Identification and designation of systemically important financial institutions, including conglomerates.
- Formulation and implementation of system wide measures for mitigation of systemic risk.
- Inter-regulatory agency coordination.
- Crisis management
One of the main functions of the FDMC will be to establish an electronic database for financial regulatory information. FDMC should be in-charge of the day to day operations, maintenance and updating the electronic database, analyse the data submitted in the database and provide analytical support to FSDC. While doing this, the FDMC should also ensure that it maintains internal controls between its functions of collecting and analysing the data.
Confidentiality and Access to Data
As the data collected by the FDMC is important and sensitive there will be measures in place to ensure that data access is regulated and monitored. FDMC can access and use the information stored in the database only for the purpose of performing its functions and in the manner specified by the regulations. Reserve Bank of India (RBI) is of the view that since sharing of data pertaining to individual entity would attract confidentiality clause and is prohibited, only consolidated information can be passed on to FDMC.
Adequate safeguards will be incorporated in the law related to confidentiality to protect the regulatory data provided by the regulator. The level of protection offered by the FDMC to the data should be the same as provided by the relevant enactments applicable to the relevant regulators. This measure will ensure that confidentiality of data is not compromised and the data is accessed and used only for the permitted purposes as specified in the draft law.
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