A weathervane for a changing world: refreshing our data and analytics strategy − speech by James Benford

Given at Big Data and AI World, part of Tech Show London, at the ExCeL centre, Royal Victoria Dock, London
Published on 07 March 2024
The Bank’s Data and Technology areas are leading a refresh of the Bank’s data and analytics strategy. The new Bank-wide approach will strengthen data governance and management, enhance external data sharing, stand up a new platform on the Cloud and explore pilots of AI tools. The approach on skills is broadening and data will be established as a profession.

Speech

Good morning. It is a pleasure to be here to speak to you today.

I will talk today on the steps underway at the Bank of England, between our data and technology areas, to update our data and analytics strategy.

It’s important for two reasons.

First, the way we collect and use data has implications far beyond the organisation itself.

The Bank sets the main interest rate in the economy to meet our inflation target of 2%. We produce and circulate banknotes and oversee the smooth running of payment system. We regulate UK banks, building societies, insurers and large investment firms to make sure they are being run in a safe and sound way. We monitor risk across the UK financial system as a whole, taking action to mitigate it where needed. We can support the financial system by lending to it when and where needed. Where firms run into difficulties, we ensure this doesn’t cause problems for protected depositors, for taxpayers or the wider economy.

Across all these areas, data and analysis drive policy decisions the Bank makes and how we communicate them.

Further, data we collect and how we collect it affects over 2000 financial institutions that report to us and contributes to over 37½ thousand published data series which are core to UK and global financial statistics.

Second, I hope that sharing our experience will be of use to others. Plotting a course on data for complex, long-standing organisations is not straightforward, particularly during periods of rapid technological change.

The Bank and its history with data

I will start by saying a bit about the Bank’s history with data.

That context explains where we are today and shapes the priorities for the next stage.

Data are the lifeblood of the Bank and analytics the beating heart behind our decisions. We cannot take effective decisions to discharge our functions without detailed information and expert analysis about the economy and financial system. It has always been thus, right back to when the Bank was founded as a private bank in 1694.

There are many historical examples, but my favourite goes back to 1805 when a wind dial was put up in the Court room in the Bank, effectively our boardroom, linked to a vane on the roof. Back then, the weather was an important regular influence on the economy and that dial drove the Bank’s decisions on monetary policy. When the wind came in from the east, ships would be sailing up the Thames to unload their goods. The Bank would then put more money in circulation, so traders could purchase goods as they were unloaded. If the wind came from the west, the Bank would pull back excess money, to stop too much money chasing fewer goods, tempering inflation.

Over two hundred years later, we talk of real-time dashboards driving decisions in the board room. The technology is different and there are a lot more data, but the intent is identical.

Production of statistics by the Bank can be traced back to 1851, when the Cashier’s office was collating things like the average price of wheat and metals; gold and silver bullion holdings and exchanges; and, of course, interest rates. These were brought together in a book of ‘Periodical Fluctuations’, first compiled in 1875. By 1921, the first department at the Bank dealing with economic and financial statistics was formed producing estimates for the economy as a whole, including for the balance of payments. In 1960, we began to publish the Bank of England Quarterly Bulletin, with an economic commentary, articles and a statistical annex. Monetary and financial statistics moved online in 2000.

Collections to support how we regulate firms in the financial sector have a shorter, though more complex history. The Bank’s supervisory powers came with the Banking Act in 1979 in the aftermath of the secondary banking crisis. Collections later took on an international imperative following the first Basel Accord in 1991. The third iteration on Basel regulations, following the 2008 global financial crisis gave us, initially under an European purview, the system of some 200 regular regulatory returns we have today. The move of supervision from the Bank to the financial services authority in 1997, and its return to the Bank in 2013 means there is a complex reporting system in the UK where some collections come to the Bank from the Financial Conduct Authority, and some come direct. The UK’s departure from the European Union has given us a valuable opportunity to review the approach and rationalise what is collected.

Data in use in the Bank today

Given the theme of this conference, I thought I would say a bit about some fairly unique big data sets the Bank has access to from the data we collect and the data we generate from our own operations. Around 40 are managed through an on-premise data and analytics platform which offers additional computing power to crunch the numbers. I’ll give you four examples.

The largest big dataset arrives from trade repositories, who on a daily basis send us around 100 million rows of data on individual derivatives transactions and positions and around 15 million rows of data on securities financing transactions and positions. Our financial stability area has built up a range of tools to interrogate this data set every day and to monitor and flag the build-up of risk in the system.

Second, we also have a large household-level dataset encompassing quarterly reporting at the loan level on the 9.5 million mortgages in the UK,footnote [1] which has been in vital to tracking and understanding the impact of recent increases in Bank Rate.

Third, to support our analysis of the health of UK companies, we draw on a large company level dataset covering the balance sheet and profit and loss for 1,500footnote [2] firms in the UK. It was used to understand pressures on balance sheets through the pandemic with those insight going not just to our Monetary and Financial Policy Committees but also to HM Treasury to help them design and run various corporate loan schemes. We also run a monthly Decision Maker Panel survey of more than 2000 firmsfootnote [3] up and down the country.

Fourth, all electronic payments in the UK run through the real time gross settlement system or RTGS, which the Bank runs. RTGS processes over £775 bnfootnote [4] of payments each working day providing the Bank with a unique window on the economy. As well as putting it to use internally with the MPC, we made cuts of the data available to the ONS during the pandemic to help them track what was happening to spending in the economy.

Updating the Bank’s Data and Analytics Strategy