22 October 2017
Find out more

Regulators call for substantial IT investment to combat risk deficiencies

22 October 2009  |  8318 views  |  0 Risk on chalkboard

Financial services firms need to make substantial and sustained investments in IT infrastructure if they are to overcome severe underlying weaknesses in their risk management capabilities, according to a report by financial regulatory agencies.

The Senior Supervisors Group (SSG) that comprises watchdogs from seven countries (United States, Canada, France, Germany, Japan, Switzerland, United Kingdom) says that underlying weaknesses in governance, incentive structures, information technology infrastructure and internal controls require substantial work to address.

The SSG report evaluates how weaknesses in risk management and internal controls contributed to industry distress during the financial crisis. Among other failings, it concludes that inadequate and often fragmented technological infrastructures at most firms hindered effective risk identification and measurement.

One challenge to improving risk management systems has been poor integration resulting from multiple mergers and acquisitions, says the report. One firm suggested that acquisitions over the years have produced an environment in which static data are largely disaggregated. Another firm echoed this view, reporting that certain products and lines of business have not been included in data aggregation and analysis processes. A third firm reported that having two systems for the same business results in duplication of processes.

Almost all struggled to process record-high volumes of product transactions during periods of market stress.

Many firms cited large-scale IT projects planned or under way to address these infrastructure and aggregation deficiencies.

Supervisors remain sceptical, however, noting that firms need to reexamine the priority they have traditionally given to revenue-generating businesses over reporting and control functions.

"In the past, many such projects have fallen behind schedule because of inadequate investment and resources," states the report. "In the current environment, these projects will require a significant dedication of funds, sponsorship, and commitment from the board and senior management during challenging economic times to ensure that technology platforms are constructed to handle unexpected spikes in volumes and to effectively produce aggregated data and appropriate management information for credit, liquidity, market, and other risk metrics.

Read the full report:» Download the document now 1.1 mb (PDF File)

Comments: (0)

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

FSA finalises far-reaching overhaul of UK liquidity regulation

FSA finalises far-reaching overhaul of UK liquidity regulation

05 October 2009  |  5738 views  |  1 comments
Risk and regulation driving IT spending priorities at transaction banks

Risk and regulation driving IT spending priorities at transaction banks

14 September 2009  |  10432 views  |  0 comments
Call for national reference data respository to combat systemic risk

Call for national reference data respository to combat systemic risk

07 August 2009  |  4655 views  |  0 comments
Credit crisis spurs real-time risk management IT spending - survey

Credit crisis spurs real-time risk management IT spending - survey

14 July 2009  |  8869 views  |  0 comments
Data quality key to risk overhaul - survey

Data quality key to risk overhaul - survey

06 May 2009  |  8171 views  |  1 comments
Firms face multi-million pound liquidity reporting bill

Firms face multi-million pound liquidity reporting bill

17 April 2009  |  8462 views  |  1 comments
Risk management overhaul tops bank agendas for 2009 - KPMG

Risk management overhaul tops bank agendas for 2009 - KPMG

06 January 2009  |  12055 views  |  3 comments
Crisis exposes banks' weak risk management practices - Ernst & Young

Crisis exposes banks' weak risk management practices - Ernst & Young

18 December 2008  |  12490 views  |  2 comments
Stretched back offices win reprieve as FSA warns banks on staff cuts

Stretched back offices win reprieve as FSA warns banks on staff cuts

26 August 2008  |  13285 views  |  0 comments
visit www.vasco.comvisit www.atos.netvisit www.innotribe.com

Top topics

Most viewed Most shared
HSBC partners Bud for open banking trialHSBC partners Bud for open banking trial
10732 views comments | 22 tweets | 26 linkedin
Mastercard to roll out blockchain APIMastercard to roll out blockchain API
10437 views comments | 17 tweets | 24 linkedin
satelliteGates Foundation backs Ripple collaboratio...
9129 views comments | 13 tweets | 10 linkedin
IBM uses blockchain to improve cross-border payments processingIBM uses blockchain to improve cross-borde...
8186 views comments | 9 tweets | 17 linkedin
Sibos 2017: API or the highwaySibos 2017: API or the highway
8037 views comments | 10 tweets | 22 linkedin

Featured job

Competitive base, commission, benefits
London, UK

Find your next job