Banks could soon have to seperate groupwide outsourcing contracts?

Banks are big spenders when it comes to IT outsourcing and big banks have large ecosystems of service providers.

If the changes to the banking sector proposed by the Independent Banking Commission’s (IBC) interim report are adopted outsourcing contracts might have to change.

The IBC has recommended that banks ring-fence their retail divisions to protect them from potential problems caused by their higher risk investment and wholesale banking divisions.

I was talking to John Worthy, technology partner at law firm Field Fisher Waterhouse, today. He told me that the report suggests that the retail operations of banks will not be able to share outsourcing deals with other parts of the banks.

For example banks will not be able to have single desktop services deal which crosses units, says Worthy. “The retail units of universal banks will have to have their own IT infrastructures. It looks like it is saying that all IT and outsourcing for retail units will be dedicated to these units.”

He says it will cost a lot for banks to meet these rules but not as much as the alternative, which would be full separation rather than ring-fencing.

See the full IBC report here.