Is Finance IT prepared for the impact of regulation? We’ve spoken to some investment banks in New York and London and it seems that banks are at risk of underfunding the implementation of regulatory changes in Finance IT and that staffing levels have fallen
back, leaving the sector exposed. Our findings expect Finance IT sell-side spending to increase to nearly $1bn ($999.22) by 2012, up just 5% after a 13% drop since 2007. Nevertheless, there is a considerable gap in Finance IT budgets between top and second
tier banks as a proportion of revenues; with some second tier banks planning to spend less than half a million dollars per annum, whilst one top tier institution is budgeting $100m over a multi-year programme.
We think the increasing focus in London and New York on the impact of regulatory changes and firm-wide risk management practices is causing a shift in focus from the front office to cost centres, as banks work to attract and divert talent to reorganising
the back office. But, staffing levels are down 10% from 2008 highs, back to 2000 levels, which could well leave IT teams struggling to implement. As one respondent from a top tier bank commented “Finding the right people within the budget. That’s the biggest
thicket”.
Finance IT touches the whole business and we don’t think financial institutions can afford to cut back funding in this area. Another concern is that, stated objectives are not aligned with budgets overall; the planned funding does not correspond with the
levels of ambition.
So, what can be done? Regulation has become a strong business driver and so a strategic approach is needed to ensure that spending is bank-wide and meaningful.
Reengineering business processes will need a well put together and managed team to intelligently resolve the problem. Financial institutions will have to be more adept at efficiently managing external, project-specific resources, rather than just throwing
bodies at the problem. Banks which understand this will thrive by investing in the back office to improve systems and processes to increase productivity.
Graham Underwood, Managing Director, GFT UK.