The importance of data for central bank reserve managers is becoming increasingly evident. For the Global Public Investor 2023 report, OMFIF surveyed 75 central bank reserve managers with international reserves close to $5tn. To better understand how technological innovations around data collection, integration and management are impacting this group of public investors, for the first time, we posed a series of questions specifically devoted to operational and data-related challenges.
Focus on building or improving internal data management systems Â
When asked what their data priorities are over the next two years, 87% of respondents expressed that data is a focus in the next 12-24 months (Figure 1). More specifically, 74% stated their intention to develop or enhance internal data management systems, which is greater than any other data priority. An additional 15% reported their intention to outsource building or improving data management systems. This demonstrates that data management is taking precedence for central banks, who are primarily looking to embrace this for their internal reserve management functions.
‘A good starting point here for many [central banks] is to start looking at the consolidation of systems across asset classes and business lines in a systematic way,’ explained Oliver Berger, head of Middle East & North Africa, State Street Corporation. ‘As systems continue to be consolidated, data can be more easily digested, analysed and applied across departments.’
Figure 1. Development of data a key priority among central banks
What are your data priorities for the next 12-24 months? Share of respondents, %
Source: OMFIF Global Public Investor 2023 survey
Data access, integration and visibility lesser concerns
Reserve managers are prioritising managing data systems over integrating or acquiring new sources of data. Though 40% of institutions listed integration and increasing visibility of data sources as a priority, this is far less than the number looking to build or improve internal data management systems. Only 28% are looking to obtain new or better data sources, though this share is slightly higher for participants from emerging markets, at 36%.
Portfolio visibility and incorporating unstructured data sources do not appear to be major obstacles for reserve managers. More than three-quarters of institutions (79%) reported that they can obtain a comprehensive portfolio view within 24 hours or less, and 37% reported having near real-time visibility of their entire portfolio (Figure 2). This suggests that reserve managers are satisfied with data access and visibility across their portfolios.
Figure 2. Portfolio view not an issue for reserve managers
How long does it take your institution to obtain a total portfolio view across all asset classes? Share of respondents, %
Source: OMFIF Global Public Investor 2023 survey
When questioned about their level of satisfaction with the integration of unconventional or unstructured data sources, 32% of respondents expressed neither satisfaction nor dissatisfaction. Additionally, 46% considered the question irrelevant to reserve management. The incorporation of alternative data remains of limited use for reserve management at this stage.
ESG data paucity hindering progress on sustainable investment Â
Though many reserve managers are generally satisfied with their capabilities around data access, integration and visibility, they would like to see improved data on sustainable assets. Overall, 72% of reserve managers see insufficient data as the biggest barrier to further environmental, social and governance adoption in their portfolios. 55% would like to see better data and analysis of sustainable assets – which is a higher share than any other asset class (Figure 3).
Reserve managers face a persistent challenge of obtaining reliable ESG data due to a lack of consistency. While there are several indexes and scores available for the performance of ESG assets, they have not yet been standardised. Therefore, there is still a need for additional sense-checking of ESG data.
Figure 3. Better data needed for sustainable assets
For which assets would you like to see improved data access and analysis? Share of respondents, %
Source: OMFIF Global Public Investor 2023 survey
Talent most common operating challenge
On operating challenges more broadly, reserve managers’ main issues pertain to talent. Recruitment and training were the most reported operational challenges among central bank reserve managers, mentioned by 58% of respondents. This was followed by accessing effective analytical tools (49%) and accessing relevant data or information (33%). Beyond recruitment, ‘personnel retention’ was noted as a problem by several respondents.
Similar to other central bank departments, reserve managers are seeking assistance from third parties to fill in personnel gaps, namely by turning to external managers. A majority (74%) of reserve managers reported using external managers, who are responsible for overseeing an average of 13% of international reserves. Knowledge transfer and access to complex asset classes are the primary reason central banks use external managers: 68% report knowledge transfer as the reason for external management of reserves, while 50% report using external managers to access complex asset classes.
IT transformations in progress
Overall, reserve managers would generally prefer to bolster their internal capacity – both in terms of personnel and internal data management systems. Some respondents noted they are upgrading their technological infrastructure to help in this regard. Comments from the survey participants revealed that several institutions are undergoing transformative IT or data projects. ‘Simplification of the existing architecture is, in many cases, the biggest challenge facing IT teams at central banks,’ noted Berger, ‘and patchwork or monolithic data frameworks are simply not a viable option.’
As central banks continue to expand their data and analytical capabilities, it is likely that an increasing number of central banks will undertake technological transformations in the years to come.
Taylor Pearce is Senior Economist at OMFIF.
This article is an abridged version of a chapter in OMFIF report ‘Central banks in the digital age: Bringing data into focus’.