The recent snooping scandal involving global financial information and news provider Bloomberg LP has sounded an alarm for the Chinese financial industry and its heavy reliance on foreign data services.
Bloomberg LP announced on Friday the appointment of former IBM Chairman and Chief Executive Officer Samuel J. Palmisano as an independent adviser regarding privacy and data standards.
It was the company's latest move to placate client concerns after it acknowledged that Bloomberg reporters had long been able to access information on clients' use of Bloomberg's data terminals, including their login history and functions used.
As the U.S. Federal Reserve and central banks in Europe and Japan have all reportedly started looking into the issue or contacted Bloomberg for information on the matter, China would also do well to stay vigilant about financial data safety.
"For a country like China that has such huge foreign exchange reserves, its forex investment portfolio has always been under the global spotlight," said financial commentator Yu Fenghui. "Any chance of China's investment intention being snooped on or leaked may cause huge market fluctuations or losses."
As of the end of the first quarter this year, China's foreign exchange reserves stood at a mammoth 3.44 trillion U.S. dollars, the world's largest.
According to Yu, Chinese users of Bloomberg's data terminals include not only major commercial banks, securities firms, investment banks and fund management companies but also China's central bank and foreign exchange watchdog.
If information on those decision makers' use of Bloomberg terminals is gathered by Bloomberg journalists for analysis or leaked to a third party, it will bring huge risks for China's financial sector, warned Yu.
In an attempt to reassure customers, Daniel Doctoroff, chief executive officer and president of Bloomberg LP, blogged on Wednesday that its reporters "now have access to the same client information as any Bloomberg client."
It seems Bloomberg is yet another case of being "too big to fail."
As the world's leading financial information service provider, Bloomberg LP has over 315,000 subscribers to its financial terminals, mostly high-end clients such as government institutions, banks, corporations and news agencies.
The quality of data service available on Bloomberg terminals is high and it's hard to find a substitute for the product, said a former employee of a European bank's office in China, who declined to be named.
Xinhua emailed questions to a Bloomberg official in charge of corporate affairs on subscriptions to Bloomberg terminals in China, but has not received replies so far.
Bloomberg LP and its rival Thomson Reuters take up about 70 percent of the global financial data service market, according to Yu.
He said the Bloomberg snooping scandal highlights the need for China to develop its own financial information services as the country's financial industry becomes more integrated into the world market, "otherwise China' s economic and financial safety may be threatened."
However, China's own financial data services have a long way to go to rival its international counterparts because it's difficult to challenge the monopoly of Bloomberg and Thomson Reuters and their strong capability of data analysis, he added.