Banks must improve their IT systems
The UK's financial regulators should force banks to update their legacy systems in order to tackle the substandard infrastructure that underpins the majority of the financial sector, says Intellect, the trade association for the UK technology sector.
Intellect warns that if IT systems aren’t improved there is a risk of future financial crises, controversies and systems failures.
It has published a paper, Biting the bullet – why now is the time to rebuild the foundations of the financial system, which outlines how this substandard infrastructure does not allow banks to 'know their own businesses' well enough. It is the result of years of lack of investment by banks.
Intellect says that 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.
The report points out that banks 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 millisecond means more profit – but not on modernising the infrastructure that allows them to deliver better customer services.
Ben Wilson, head of financial services programmes at Intellect, said: "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.”