Retail banks must up the IT ante

Beverley Head
Tuesday, 19 October 2010 19:52

Business IT - Technology

Retail banks need to develop information technology systems that will provide much greater transparency about their operations or risk the wrath of global financial regulators - but few have planned or budgeted for the required upgrades.

While the current timetable for the Basel III reforms calls for the new regime governing capital and liquidity to be bedded down by 2019, technology analyst Ovum believes the IT foundations will have to be laid next year.

Alex Kwiatkowski, a London based analyst with Ovum which has just published his report, 2011 Trends to Watch: Retail Banking Technology, said that retail banks had no choice but to develop systems and processes to ensure they were compliant with the emerging Basel III regulations. They should not however expect their IT budgets to suddenly expand.

Bank IT departments would instead have to work with existing budgets and IT skills to develop compliant systems, at the same time as they juggled shifting customer expectations and a constantly changing competitive landscape.

'There is a conflicting pressure. You can't just say to the regulator 'Oh look I've got Basel III complete but the rest of my business is declining',' Mr Kwiatkowski.

'Banks will be expected to deliver mandatory change and keep pace with their peers on innovation,' he said. 'While Basel III will be phased in from 2013 to 2019, it will be in 2011 and 2012 when the foundation blocks are laid, so there is no time to put off planning.'

He said that while Australian and New Zealand banks had weathered the global financial sector storm better than many of their international peers, in part because of better governance, compliance and risk management systems than their international peers; 'No bank can ignore what Basel III will demand of them,' in terms of systems which were able to deliver reporting timeliness and accuracy.