Application of Classification Algorithms for the Assessment of Confirmation to Quality Remarks

27 Pages Posted: 30 Jul 2021

Date Written: July 29, 2021

Abstract

In the context of the data quality management of supervisory banking data, the Bank of Italy receives a significant number of data reports at various intervals from Italian banks. If any anomalies are found, a quality remark is sent back, questioning the data submitted. This process can lead to the bank in question confirming or revising the data it previously transmitted. We propose an innovative methodology, based on text mining and machine learning techniques, for the automatic processing of the data confirmations received from banks. A classification model is employed to predict whether these confirmations should be accepted or rejected based on the reasons provided by the reporting banks, the characteristics of the validation quality checks, and reporting behaviour across the banking system. The model was trained on past cases already labelled by data managers and its performance was assessed against a set of cross-checked cases that were used as gold standard. The empirical findings show that the methodology predicts the correct decisions on recurrent data confirmations and that the performance of the proposed model is comparable to that of data managers currently engaged in data analysis.

Keywords: supervisory banking data, data quality management, machine learning, text mining, latent dirichlet allocation, gradient boosting

JEL Classification: C18, C81, G21

Suggested Citation

Zambuto, Fabio and Arcuti, Simona and Sabatini, Roberto and Zambuto, Daniele, Application of Classification Algorithms for the Assessment of Confirmation to Quality Remarks (July 29, 2021). Bank of Italy Occasional Paper No. 631, Available at SSRN: https://ssrn.com/abstract=3896315 or http://dx.doi.org/10.2139/ssrn.3896315

Fabio Zambuto (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Simona Arcuti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberto Sabatini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Daniele Zambuto

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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