Bill would create data-monitoring institute to track risks in financial system

Sen. Jack Reed, D-R.I., introduced a measure on Monday that would create a National Institute of Finance to give regulators better data to monitor systemic risk throughout the financial system.

The NIF would collect and standardize data, conduct long-term research and develop tools for measuring threats to the financial system in an effort to prevent another banking crisis, according Reed, the chairman of the Senate Banking Securities, Insurance and Investment Subcommittee.

"Our current financial regulations are outdated. . . . Over the last several decades, a completely unregulated 'shadow-banking' system has metastasized to the point where many of these new products and market-participants, such as derivatives and hedge funds, remain completely out of reach of financial regulators," he said. "We need to address systemic risk and follow through with a strong, independent and well-funded data, research, and analytic capacity to fulfill its mission."

The legislation was spurred by a National Academy of Sciences finding that the United States lacks the tools to comprehensively and precisely monitor systemic risk to the financial system.