Europe's banks will not be given a reprieve from updating their IT systems to support the Basel II credit risk regulations.

The Basel banking supervision committee has refused to move its compliance deadline for the Accord beyond 2006, despite substantial lobbying from European financial institutions.

Following a meeting last weekend, the committee said that all outstanding issues should be resolved by mid-2004, some six months behind schedule, but not enough to delay the Accord's implementation.

Banks have to start recording transactional data at the start of next year, ready to have three-years worth of historical information when Basel II comes into effect.

Many banks believe that the Accord's rules are too onerous and could potentially aggravate economic peaks and troughs. The British Bankers Association (BBA) and London Investment Banking Association submitted a list of concerns, saying the Accord was unduly complex and would impose a high cost for compliance.

Barclays says it is spending around 20 per cent of its £300m annual IT budget on various regulatory programmes.

'We spend in the realm of £55m to £60m every year across a range of regulatory contributions,' said Barclays chief technology officer Kevin Lloyd.

He says the Accord is a source of 'huge tension and huge cost' for the bank, but acknowledges that regulatory compliance comes with the territory for financial institutions.

Lloyds TSB says its IT systems are on track for complying with the initial 1 January 2004 Basel deadline.

'We're in an advantageous position. In consumer banking, much of the work needed for the Accord is already done, so we're confident that we're on track,' said Lloyds TSB credit risk director Shahram Sharifi.

The bank's Basel II applications are going into testing this month, with final implementation planned for December.

A spokesman for the BBA said: 'Banks are facing increasing demands for information and many are coming from outside the UK. Naturally, there is an impact on banks' systems because they're principally IT-driven due to the volume of data involved.'