IT directors in the banking industry risk being sidelined
by company boards in one of the biggest technology-related projects
since Y2K, a new survey has suggested.
The New Basel Capital Accord, a regulatory framework for the
banking industry commonly known a Basel 2, is set to pose
wide-ranging challenges for bank IT and risk management systems,
according to analysts.
Compliance projects are expected to cost larger banks up to £100m,
including IT and business costs, according to the regulatory
watchdog the Financial Services Authority. IT challenges include
linking a maze of banking databases and reporting systems, updating
older applications and ensuring data is accurate.
However, 24% of board directors surveyed at 50 UK financial firms
said management software "was not important at all" in achieving
compliance with Basel 2. Some 30% of directors thought management
software was fairly important and 34% said software was highly
important.
The survey, commissioned by business software supplier Cognos,
found widespread doubts among board directors about the progress of
Basel 2 projects. Of those questioned, 48% said they were unsure
whether their bank would achieve full compliance in time. Concerns
were also raised by 54% of directors who said they had not received
the necessary IT data to help them make strategic decisions for the
business.
Jost Hoppermann, vice president at Forrester Research, expressed
surprise that board directors would largely overlook the important
role software will play in Basel 2 projects.
"Our findings show that 50% to 60% of Basel 2 costs are
IT-related," he said. "Although the most important IT projects will
involve data modelling and cleansing, software will be need-ed to
enter external risk ratings and calculate risk assessments."
Basel 2 IT tasks
Basel 2 aims to improve the stability of the world's financial
system by making banks' assessment of their own investments and
loans more sensitive to credit- and market-related risks. Banks
will have to ensure financial data is timely and accurate and that
it reflects the risks outlined under the accord.