The Independent Banking Commissions (IBC) final report of the banking sector reforms that are required to avoid the carnage that began in 2008 with the fall of Lehman Brothers, has some interesting points for IT suppliers to consider.
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The report recommended ring fencing the retail divisions of the big banks to protect them from potential failures of investment units. When the credit crunch hit the banks with investment arms were hit hard and through no fault of their own retail customers faced massive losses had the UK government not stepped in to bail the banks out.
Ring fencing will not only mean systems will have to be separated but entire operations.
There is some very interesting points in the full report that describe how the retail operations of banks need to have an operation that can fully function in the event of the rest of the group going under.
The report said the “wider corporate group should be required to put in place agreements to ensure that the ring-fenced bank has continuous access to all of the operations, staff, data and services required to continue its activities, irrespective of the financial health of the rest of the group.”
It seems there will be three options, which all have a huge impact on IT.
1 – A full operation for the retail bank that is completely separate from the group.
2 – The creation a subsidiary to house operations.
3 – An independent agreement with a supplier to ensure service continuity even if the rest of the bank failed.
Point three could be done by an outsourcing service provider or providers. “All of the relevant infrastructure could be supplied independently of the ring-fenced bank – either from a third party, or from the rest of the group, with appropriate service level agreements in place,” said the report.