Barclays Capital has invested in new software to help it comply with industry regulations, including the US Sarbanes-Oxley Act and the Basel 2 Accord.
The investment banking division of Barclays Bank will use four software modules from UK-based Raft International to help it identify and manage the risks facing its business and introduce the necessary controls to meet international market regulations.
One of the modules will allow Barclays to analyse information stored on a central database for exceptional items, such as incorrect deals and regulatory fines. Another module will give the company an overview of the different risks faced by its business and grade their importance.
Philip Scott, director of operational risk at Barclays Capital, said the company wanted a best-practice product "that could take us beyond regulatory compliance", and added, "The Raft Radar provides us with an integrated product that can be deployed globally."
The deal has been driven by the need to comply with new industry regulations, which will require a significant investment in IT systems by firms.
Georgina O’Toole, an analyst at Ovum Holway, said IT investment by financial firms to comply with regulations would bring wider benefits.
"Regulation projects such as Sarbanes-Oxley and Basel 2 have a dual effect. [In addition to helping firms comply with tighter regulations] they help to better integrate IT systems and enhance datacentres," O’Toole said.
Forthcoming financial regulations:
New Basel Capital Accord
Commonly known as Basel 2, the accord is due to be implemented by banks by the end of 2006.
It updates the 1988 accord and aims to improve the stability of the world’s financial systems by making banks’ assessment of their own investments and loans more sensitive to credit- and market-related risks.
It has been billed as the biggest IT challenge for the banking industry since Y2K. Analyst firm Datamonitor predicts that IT spending on Basel 2 by European banks will peak at about £700m in 2005.
Banks will have to ensure financial data is timely and accurate and that it reflects the risks outlined under the accord.
This legislation affects companies listed in the US and their subsidiaries worldwide. The legislation is due to come into force in June under a phased implementation. It aims to create greater financial transparency in the wake of corporate scandals such as Enron and WorldCom.
The act will have implications for the management, maintenance and storage of data. Chief executives and chief financial officers will be required to show proof that that their data and business processes conform to clearly defined rules.