The Parliamentary Commission on Banking Standards’ recommendations do not fully address the fundamental frailties and counterproductive complexities of the technology infrastructure that underpins the financial system. That’s according to Intellect, the trade association for the UK technology industry.

It says that, in contrast to many other industry reviews and investigations since the financial crisis, the Commission has commendably acknowledged the role of ‘patchy and outdated’ technology infrastructure in creating problems such as banks that are ‘too complex to manage’ and scuppering competition-enhancing branch divestures. However, it has not addressed this fundamental problem as part of its recommendations.

Intellect believes that by seeking to address a number of technology-based challenges on a point-by-point basis – including the perceived weaknesses of the Financial Conduct Authority’s IT systems which it has inherited from the FSA, and consideration of a common utility platform for core banking services – the Commission is missing an opportunity to catalyse a solution to these challenges at a root point. The trade association argues that there is a strong case for the Government to take on board this issue of technology infrastructure alongside the recommendations within the Commission’s report, and in particular:

Consideration of a greater number of technology-literate individuals in decision-making positions on boards

Encouraging banks to more comprehensively map their existing systems and processes – which should have been done as part of ongoing recovery and resolution requirements. If this is undertaken, change can be implemented more quickly and with reduced cost; weaknesses and risks can be better identified before they impact customers; and decisions on issues such as branch divestures can be made with greater certainty

Clarification from regulatory authorities on what they want banks to be able to do in the future and allow banks to work towards this, without wasting money on duplicative regulatory implementation

Facilitating a greater degree of collaboration across banks, to identify how common problems of technology infrastructure – outlined comprehensively in the Commission’s paper - can be addressed more systematically and effectively

Ben Wilson, associate director for financial services programmes at Intellect, says: “The public has only recently gained an insight into the all encompassing nature of the technology that underpins their banks, and indeed the entire financial system, through a demonstration of what happens when this stops working. A light has been shone on the 90 per cent of the technology iceberg that is underwater, and that the Commission has recognised technology is not only a challenge for the industry to surmount, but also part of the solution in doing so, is commendable. But they have, nonetheless, missed an opportunity to really bury down into some of the problems they identify, and connect the dots. Many of these issues around conduct, competition and supervision have a common denominator – the technology infrastructures that facilitate all the operations of ‘the bank’. You reduce the complexity of this, and you ultimately make life a lot easier for the banks and the regulators, and you improve the ability of the banks to serve the customers and the wider economy’.

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