by Hans Tesselaar, Executive Director at BIAN
The benefits of having a simple structure, easily navigable for both processors and humans in a bank’s architecture are a boon not only to each individual bank, but the bodies that oversee them as well.
No matter what the good intentions and solid reasons behind a piece of regulation in the financial sector, there is always the risk it will be met with dislike or outright distrust – regulation has been known to be regarded by a large part of the banking sector as an attack on bank’s autonomy and even the free market itself. However, when it becomes clear that a new rule will benefit everyone involved, the reasons for not wanting to adopt shift. It becomes less about ideology and more about cost. So, the question is: How can we make it easier for banks to adopt the rules they want to?
One solution lies with the central and federal banks and the organisations which create the regulations in the first place. Along with their other responsibilities, these groups are charged with overall maintenance of the stability of the financial industry. This can be read to include ensuring that the banks they look after have an IT system that can handle the pressures of modern banking and an IT-portfolio that will strengthen – instead of weakening – their IT infrastructure.
One question comes to my mind when considering this: could mandating a standardised framework for IT architecture be good for the financial industry? There are certainly benefits, though of course there are also possible drawbacks.
With an agreed Service Oriented Architecture, for example, a central or federal bank would be able to quickly and easily assess a banks capability of adopting new regulations and could advise accordingly. With this SOA system also, components can be bought “off-the-shelf” and easily added to the network. This means that it is theoretically possible for software that updates a system to adapt to regulatory changes to simply be distributed by vendors and software suppliers in much the same way that they currently offer SEPA functionality as an add-on to existing software packages. This reduces changeover time, cost and ensures the industry is up to date with required regulations.
The system also allows easy identification of problematic areas. IT errors in existing banking IT structures can sometimes take days or weeks to identify. Where each service is easily identifiable, you can track it down and troubleshoot much more quickly.
A counterargument could run along the lines of banks being less competitive if they have no technological advantage over their peers. Though a different way to look at this is that it could create an opportunity for banks to creatively innovate with their channel and product offerings and not pile their IT budget into running costs and expensive upgrades just to keep compliant.
The banks would improve their product offerings which would keep their customers happy, and reduce their IT headache, which is clearly a benefit. Our banks have central and federal oversight in many areas, why not this one?
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