10 December 2016
Visit aciworldwide.com

Bank IT systems come under regulatory spotlight

31 March 2014  |  9578 views  |  3 london tower bridge

The resilience of bank IT systems is set to come under the regulatory microscope in 2013/2014 as the UK's Financial Conduct Authority identifies technology risk as a key area of focus for the coming year.

In its Risk Outlook for 2014, the watchdog says that growing reliance on technology is increasing the exposure to the disruptive capabilities of technologies in ways that can prove costly to firms and consumers in the future.

Recent outages at RBS and the technology problems that have bedevilled the Co-op Bank raises questions over whether current systems are adequate to handle a new era in digital banking.

The effectiveness of technologies may be limited by shortcomings in the way in which systems are designed and managed," says the FCA. "There are also some slower-burning issues resulting from the increasing complexity of systems needed to support required data processing and transaction levels that could create future problems across different markets. Vulnerabilities are especially evident where the quality of infrastructure is low. This is mostly the case for ageing, legacy or multi-layered/integrated systems, or where previous failures have been plugged with manual workarounds affecting cost issues and control risks."

Other areas of concern arise from the risks presented by cybercrime and an over-reliance on third party and outsourced systems.

The FCA, in conjunction with the Prudential Regulatory Authority and the Bank of England, has vowed to conduct a major year-long review into how well UK banks and building societies are managing their exposure to technology risk issues and the adequacy of their IT systems in general.

Comments: (3)

Derek Britton
Derek Britton - Micro Focus - Newbury | 02 April, 2014, 10:10

The banking industry has suffered several IT outages over the past twelve months that has placed it under the eye of the FCA. All too often, we see  IT outages linked to legacy systems and yet,  the real problem typically lies in the poor investment or maintenance of these systems. They run business critical applications on a daily basis yet do not receive the appropriate funding they deserve.

According to recent research by Vanson Bourne, it costs each organization on average $11 million to bring outdated mainframe applications up to date. Much more so in Financial Services organizations. This figure increased almost a third (29%) from May 2012, when the figure stood at $8.5 million – and is also set to increase by 9% over the next five years, according to the same study.

If organisations are reliant on trusted core mainframes -regardless of vertical market -  to serve their customers they must look at strategies that enables them to assess, streamline and modernise the growing IT systems and future innovative initiatives.

Having a holistic view of critical systems will give IT departments more insight into how best to maximise business critical applications, cut the dead weight and help them establish a more efficient application delivery process. Such an approach will also mean they will not have to opt for a risky ‘rip and replace’ of existing systems which hold millions of lines of code and in essence, the organisations heritage.

A combination of tried and trusted applications and more modern tooling and delivery techniques will enable IT teams to deliver improved customer service.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Mark Gibbons
Mark Gibbons - Hudson & Yorke - London | 02 April, 2014, 11:22

The FCA has already identified that the Financial Services sector response to regulation has stretched legacy infrastuctures with 'point solutions' to achieve compliance. In my Finextra blog I discuss how Financial Institutions can proactively plan a strategic approach to ICT that can transform business operations to manage risk and achieve regulatory compliance.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Jonathan  Davis
Jonathan Davis - FIS EMEA - Watford | 04 April, 2014, 10:40

The recent IT failures in banks highlight how legacy systems are buckling under the pressure caused by the sheer volume of customer transactions from mobile and web-based systems. A tactical, piecemeal approach to legacy systems development has led to some of the serious problems the industry has encountered over recent months. In an age where our reliance on online and mobile banking is vast, the foundations they are built on must be rock solid.

Involving the regulators may be the catalyst that is needed to bring about real change and improve standards across the board. Their findings will be a call to action that can no longer be ignored. The focus being put on this by the FCA is a positive step forward for the future of banking.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Payday traffic knocks over Barclays and RBS mobile apps

Payday traffic knocks over Barclays and RBS mobile apps

28 February 2014  |  9153 views  |  0 comments | 7 tweets | 11 linkedin
RBS to slash number of tech and payments platforms supported from 130 to 20

RBS to slash number of tech and payments platforms supported from 130 to 20

27 February 2014  |  10521 views  |  1 comments | 17 tweets | 15 linkedin
Quarter of Brits would consider leaving bank over IT meltdown - survey

Quarter of Brits would consider leaving bank over IT meltdown - survey

04 December 2013  |  5416 views  |  1 comments | 10 tweets | 7 linkedin
In wake of latest meltdown, RBS boss admits decades of IT neglect

In wake of latest meltdown, RBS boss admits decades of IT neglect

03 December 2013  |  8267 views  |  8 comments | 10 tweets | 5 linkedin
Co-op to slash jobs and branch network in £500 million IT overhaul

Co-op to slash jobs and branch network in £500 million IT overhaul

04 November 2013  |  4924 views  |  0 comments | 7 tweets | 1 linkedin
Co-op writes off £148 million in IT costs as losses widen

Co-op writes off £148 million in IT costs as losses widen

29 August 2013  |  7438 views  |  0 comments | 3 tweets | 5 linkedin
FCA slaps £5.6 million fine on RBS for transaction reporting failures

FCA slaps £5.6 million fine on RBS for transaction reporting failures

24 July 2013  |  7610 views  |  1 comments | 2 tweets | 5 linkedin

Related company news

 
Visit aciworldwide.comVisit contisgroup.comhttp://www.financialcrimerisk.fiserv.com/aml?r=finextra

Top topics

Most viewed Most shared
China tops world fintech rankingsChina tops world fintech rankings
8541 views comments | 39 tweets | 31 linkedin
EBA bends under weight of PSD2 mandatesEBA bends under weight of PSD2 mandates
8122 views comments | 37 tweets | 48 linkedin
Guesswork alone can crack Visa card security - Newcastle UniversityGuesswork alone can crack Visa card securi...
8006 views 12 comments | 15 tweets | 27 linkedin
PSD2 will transform the payments landscapePSD2 will transform the payments landscape
7059 views comments | 23 tweets | 13 linkedin
Fed Governor sounds warning on alternative credit scoring dataFed Governor sounds warning on alternative...
6832 views comments | 20 tweets | 23 linkedin

Featured job

to Six-Figure Base, Commission, Benefits
London, UK

Find your next job