Bankers as Buyers is an annual report prepared by the William Mills Agency, along with the assistance of analysts and bankers nationwide,”to help financial institutions and those companies serving them validate their strategic IT direction, compare investments in technology by type or direct further research.”
Below are excerpts of the 2011 report concerning compliance and regulatory spending. If you are interested in the full report, it is available online at http://tiny.cc/lguls.
Spending Projections
In retrospect, 2010 was not a banner year. We observed: technology decisions required substantially more board-level review and approval; compliance topped bankers’ concerns; and capitalization levels took center stage, all of which contributed to longer selling cycles and increased scrutiny of deals.
There are, however, reasons for optimism. Signs point to the second half of 2011 as being the time for spending to loosen up. The challenges for bankers and the companies that provide their products and services are expected to continue in at least the first half of 2011, with bankers again looking at new regulatory requirements as the main driver of much of their technology spending.
IDC Financial Insights expects financial institution technology spending to increase by about two percent for 2011 to just under $51 billion. Others predict a slightly greater increase in spending as financial institutions move forward with projects that have been put on hold the last two years, but even the most generous estimate calls for growth nearing four percent, still putting it below growth of some years earlier in the decade.
Regulatory/Compliance Spending Drives Technology Purchases
The CARD Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Basel III Accords as well as pressure for ever-increasing transparency will continue to be top-of-mind for financial institutions in 2011.
The CARD Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Basel III Accords as well as pressure for ever-increasing transparency will continue to be top-of-mind for financial institutions in 2011.
The top 100 financial institutions will spend over $100 billion a year implementing risk governance frameworks by 2012, according to research from business advisory firm Deloitte.
“One of the big issues is regulatory change,” said Capachin. “But the rules for some of the regulations have yet to be written. So funds are being set aside for regulatory compliance.” But until the rules are written, which will likely be sometime in 2011, and financial institutions have some time to interpret the impact of those rules, those funds are unlikely to be spent. So any resulting technology investments are unlikely to come until later in the year or perhaps even in 2012.
According to the 2010 Independent Community Bankers of America (ICBA) Community Bank Technology Survey, the top technology concerns are (multiple responses were permitted):
- Issue Respondents citing Complying with regulations 82%
- Protecting data and infrastructure 63%
- Systems availability and recovery 61%
- Detecting/mitigating fraud 57%
- Adding value to the organization 44%
Sixty percent of respondents said their IT spending for compliance will increase. Fifty percent said their security spending would increase, and 49 percent said their risk management spending would increase. “Risk reporting will accelerate,” Paul Schaus, president of CCG Catalyst Consulting Group, said.
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