To manage operational risk banks increasingly use data coming from data consortia formed by peer institutions. Although existing data consortia seem to work appropriately, it is worth examining why banks report properly (that is, thoroughly and truthfully), since in several countries where new data consortia are planned to be set up, there are fears that banks may choose to report untruthfully or hide information (what we call misreporting). We show that if misreporting cannot be detected, then

more »

... even in an in...nitely repeated setup the game has multiple equilibria, so proper reporting is not the unique outcome. Then we analyze two types of sanctions. When the punishment is non-monetary (e.g. exclusion from the consortium for a given number of periods), then for some parameter values even the harshest punishment cannot bring about proper reporting as the unique outcome. Nonetheless, a numerical example suggests that by designing adequately the data consortium, proper reporting can be advanced, without overly compromising anonymity. When a monetary ...ne is imposed on misreporting banks, then a su¢ ciently sever punishment results in proper reporting, even if anonymity is maintained in the limit.