Multimillion-pound IT projects at UK banks could be stalled
following calls by one of the UK's leading banking associations for
its members to more time to meet strict international risk
management regulations.The
British Banking Association issued the call to water down the New
Basel Capital Accord, commonly known a Basel 2, which, analysts
warned, could cause problems with on of the biggest IT compliance
project since Y2K.
Basel 2 is
due to be implemented by the end of 2006 and it is estimated that
banks operating globally will each have to spend between £20m and
£100m to comply with its requirements.
There was
mounting criticism in the UK and US that Basel 2 was unnecessarily
complex and the timetable too ambitious for smaller banks, ahead of
the British Banking Association's call for Basel 2 to be rolled out
more flexibly.
The BBA
said banks should to be allowed to achieve partial compliance with
the requirements of Basel 2 by the 2006 deadline but have until
2010 to achieve full compliance.
Tony Lock,
chief analyst at Bloor Research, highlighted the potential danger
this could pose for IT departments.
Many of
the larger banks are thought to be on track to achieving compliance
with Basel 2 but a four-year delay could encourage some financial
institutions to sideline half-completed IT projects.
“IT
projects must not stall. That’s the fear,” he said. “It would be
very difficult to start them up again. If it looks like the call
for a four-year delay is likely to succeed it could be serious [for
IT departments].
Lock said
a delay could leave banks running new systems and processes
alongside older systems which comply with the original Basel
Accord, which was introduced in 1988.
A delay could also have an impact on the
outsourcing boom in the financial services sector, which has been
driven by Basel 2.