Bloomberg supports central banks worldwide in managing reserves, providing several analytical support mechanisms. Counting among its clients the Saudi Arabian Monetary Authority and the Central Bank of the United Arab Emirates, Bloomberg wins this year’s Data Analytics Provider award.
The company’s analytics are powered by 50 million distinct streams of data, which help central banks streamline their decision-making across workflows – from allocating foreign reserves to maintaining financial stability. “To make well-informed investment and policy decisions, central banks need a comprehensive suite of advanced analytics powered by high-quality data,” says Michael McDonough, chief economist and global business manager for central banks at Bloomberg.
In recent years, Bloomberg has also added data and analytical tools on environmental, social and governance factors – an increasingly important area for reserve managers. The data allows central banks to conduct geospatial analysis and assess the potential effects of climate change on a country’s economy, as a part of maintaining financial stability.
Furthermore, it is crucial for reserve managers to maintain safe, highly liquid investments while still generating income. Bloomberg’s portfolio analytics allow reserve managers to break down relative and active performance. For the latter, this further breaks down into factors such as changes in interest rates and spread effects.
“The analytics can also leverage proprietary risk models to assess how various factors contributed to the portfolio’s performance, and rebalance accordingly,” says McDonough. Bloomberg indexes – which cover capital markets, technology, data, pricing, analytics, distribution and research – allow central banks to meet a wide range of different benchmarking needs.
Around the trading process, Bloomberg has also developed a customisable pre- and post-trade transaction cost analysis tool. This tool has the ability to create, schedule and distribute custom reports to provide context and insight into the trading process. Central banks that have adopted this tool are able to “quickly identify outliers and quantify the value added to the investment process” using dozens of benchmarks, says McDonough.
In addition to the tools it provides for central banks, Bloomberg has also stepped up the range of analytical services it provides to the private sector. The 2008 financial crisis underscored the importance of liquidity assessment in managing portfolio risks and assessing financial stability. Since then, Bloomberg has developed its Liquidity Assessment Tool, which covers a dataset of more than 3.7 million securities globally.
According to McDonough, this tool generates an evaluation of a company’s credit health using “scrubbed fundamental data” and quantitative models. It provides daily estimates for default risk, default likelihood and intrinsic credit default swap spreads. Bloomberg has developed the model so inputs can be adjusted to view the impact across many different scenarios.