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Investment banks to share data platform to cut compliance costs

Karl Flinders

Four investment banks are planning to build a data platform to store customer data, which will then be managed by a post-trade services provider.

According to the Financial Times, JPMorgan, Barclays, Goldman Sachs and Credit Suisse have signed a memorandum of understanding to build a data storage platform, the management of which will be outsourced to the Depository Trust and Clearing Corporation.

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The data stored will be about banks, broker-dealers, asset managers and hedge funds, and will cover information such as tax, credit check and regulatory compliance details. It will be kept in a central library.

The move will cut the costs of complying with industry regulations, which have been piling up since investment banks were widely blamed for the credit crunch that followed the collapse of investment bank Lehman Brothers in 2008.

Banks face huge IT costs in meeting financial services regulations, 140,000 pages of which have been published in the past two years. 

Finance firms are not strangers to sharing services. For example, the Society for Worldwide Interbank Financial Telecommunication (Swift) is a not-for-profit co-operative of banks that provides a network that sends millions of financial transaction messages every day across 209 countries. It is used by more than 8,000 finance firms.

A senior investment banking IT professional told Computer Weekly in January that 2013 would see regulatory projects dominate IT department planning and budgets at investment banks.

"Following all the bad news about what the banks have been doing in recent years, everyone – management, shareholders, regulators – is turning to IT to put in place more systems which monitor and trap any bad behaviour, as well as provide more reporting to regulators and cater for all the changes in regulations," he said.

"I also sense more appreciation and recognition for IT generally, as management and regulators realise the solution to many of the issues over the last few years could be addressed by IT solutions. So IT is high-profile again, rather than just buried somewhere in the back office. A few years ago, IT staff used to say they worked for a bank or an investment bank, but these days they prefer to say they ‘work in IT’, which is probably a sign they are proud of what they do but not so proud of the industry they work in right now.”


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