Transparency Bill Has Potential to Transform Federal Banking Data
On May 20, 2015, Representative Darrell Issa and eleven bipartisan cosponsors introduced the Financial Transparency Act of 2015. Nearly three months later, the bill’s future continues to rest in the hands of committee members.
The bill sets out to “amend securities, commodities, and banking laws to make the information reported to financial regulatory agencies electronically searchable, and for other purposes.” The nine entities that make up the Financial Stability Oversight Council would be subject to the bill — from the Securities and Exchange Commission (SEC) that regulates Wall Street to the Federal Housing Finance Agency that oversees Fannie Mae and Freddie Mac to the Federal Deposit Insurance Corporation that insures citizens’ bank deposits. The legislation would not require regulated banks, publicly traded companies, and other entities to report any new information, but instead deliver their reports in a standardized, machine-readable format.
What’s in the Bill?
The Financial Transparency Act of 2015 seeks to modify existing laws that require agencies to publish information. The bill requires reports to be made available online as open data that is freely available for download in bulk, accessible via API where appropriate, and offered to the public without registration requirements or reuse restrictions. The bill directs agencies to adopt consistent data standards for the information they already collect from the financial industry. Agencies would be required to adopt electronic fields and formats to replace document forms.
The Office of Financial Research at the Treasury would be held accountable to adopt data standards that apply across multiple regulators and a Legal Entity Identifier would be required for all agency reporting to improve the ability to match filings of the same entity across various regulators.
The bill calls for the SEC to remove reporting duplication for public companies. The SEC currently requires public companies to submit financial statements in both document and data formats. For example, a Fortune 500 company may produce a PDF report or a paper report in addition to an eXtensible Business Reporting Language (XBRL) file. According to the Data Transparency Coalition, SEC staff continues to focus on using the document format, instead of harnessing the power of the data files. The bill calls for the SEC to adopt a single XBRL format and remove the document reporting requirement.
Protect America’s Financial Stability
The Financial Stability Oversight Council is charged with identifying risks to the financial stability of the United States, promoting market discipline, and responding to emerging risks to the stability of the United States’ financial system. This bill will help accomplish these goals by enabling financial regulators to reap the benefits of open data. Until filings are made available in data formats like XML and XBRL, the U.S. government is systematically creating barricades to transparency and accessibility.
Documents require more effort to access, for everyone from regulatory staff to investors. Data standards allow for automation to save filers time, and allow for many of the same benefits that will be made possible by the DATA Act of 2014. Regulators may run analytics to identify fraud, tech companies may create new products to understand reporting data, and citizens will gain increased government transparency.
Bill Timeline and Challenges
Following the bill’s introduction in May, it was referred to the House Committee on Financial Services and to the House Committee on Agriculture. In June, the bill was referred to the Subcommittee on Commodity Exchanges, Energy, and Credit and six additional cosponsors joined. Three additional cosponsors signed on in July and August, bringing a total of 20 cosponsors, 14 Republicans and six Democrats, together to support this legislation.
In order for the bill to become law, it will need to move out of committee and gain Senate interest. The Data Transparency Coalition is working to increase House leadership and financial service industries’ interest in the legislation, as the bill will need a push of support to get it to the House floor and beyond. See a section-by-section summary of the bill on the Data Transparency Coalition’s site.
For more on how open financial data can benefit governments of all sizes, download our free ebook, “Three Challenges That Governments Are Solving With Open Financial Data.”