Basel II compliance fears grow for UK banks

Link: Global banks’ IT not ready for Basel II

Research commissioned by Oracle found that the two biggest stumbling blocks were a lack of access to relevant data (cited by 26% of respondents) and a lack of skills (22%).

Dave Hanley, industry leader for financial services at Oracle UK, said: ‘Where information exists in silos across the organisation, companies clearly need to look urgently at consolidating the data from legacy systems. It’s a significant piece of work, but the use of data-extraction tools can help.’

Hanley added that competition for skills could leave smaller banks and building societies at a disadvantage. ‘Typically the bigger banks have more buying power and larger projects, so they’ll be able to get access to the required skills and experience.

‘But tier-two financial institutions will probably need to rely on the use of packaged solutions and the sharing of data and resources if they are to achieve compliance on time.’

The research also highlighted a lack of knowledge and information sharing in many firms, with a quarter of respondents saying they were unaware of what skills they needed and whether these were available internally.

But Hanley said this situation should change as the December 2006 deadline nears. ‘I think the market will respond once those organisations leading the way start to talk about the business advantages they’re seeing, such as being able to reduce regulatory capital, having more resilient processes and demonstrating that compliance enables them to run their businesses more effectively.’

Indeed, a third of respondents said they thought compliance would profit shareholders, with 18 per cent stating they thought customers would also see benefits.

‘While these figures may not seem very high, if you asked the same question a year ago they would have been much lower,’ said Hanley.

The Basel II accord, drawn up by the Bank for International Settlements (BIS), is designed to improve transparency in financial institutions by requiring them to disclose substantially more information to clients and investors than is currently the case.

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