By Scott Thompson
The UK's financial regulators should force banks to tackle legacy IT systems, or risk future financial crises and systems failures, such as the recent RBS meltdown.
Intellect, the trade association for the UK technology sector, says that a substandard infrastructure, the result of years of lack of investment by banks, does not allow them to 'know their own businesses' well enough.
Unless this is tackled the new regulators will not have an accurate view of 'the whole' of the financial system, preventing them from spotting abuses or another financial crisis before it is too late. Similarly it is this poor infrastructure which is responsible for banks not being able to deliver the level of customer service that is expected of them, argues Intellect. Institutions are willing to spend money on cutting edge technology that facilitates high frequency trading or reduces the time it takes to process a transaction in the capital markets – where every cut millisecond means more profit – but not on modernising the infrastructure that allows them to deliver better customer services, act as a catalyst for the economy or allow regulators to perform their roles.
The trade group is calling for the UK's regulatory authorities to step in and mandate change by requiring banks to ensure that their critical infrastructure is fit for purpose, not as 'yet another thing to be implemented', but as the foundation upon which all other reform can be more effective and banks can look to regain the public's trust.
Ben Wilson, head of financial services programmes at Intellect, says: "This infrastructure is the foundation upon which the entire financial system is built and it has been neglected for far too long. For the past four years, government and regulators have been trying to treat the wounds exposed by the financial crisis with sticking plasters. The regulators, and in particular the Financial Policy Committee and the forthcoming Prudential Regulatory Authority, must take the lead on this now – it's not going to sort itself out. They either address this elephant in the room, or the effectiveness of the wider reforms that so much time and resource has been ploughed into over the last four years will be severely limited."