Regulatory Spending - Godsend ?

It is widely expected that technology spending in 2013-14 is going to be centered on Regulatory mandates. It is also expected that this will lead to the backtracking of several change programs that Banks / FIs proposed to undertake to increase STP, reduce inefficiencies in process, enable resiliency and stability of systems and improving scalability of systems to handle large volumes.

In running after regulatory compliance, Banks will want to run a tight ship and all discretionary programs will have a tough time getting approved. This will potentially see a drop in the initiatives towards efficiency or other client relationship improvement programs. This does not mean those programs are less important, they are just not up there in the survival sweepstakes.

What does this mean to the CTB managers? Do they go with the flow agreeing to cut down on all non-essential expenditure?

Or do they use this time to prepare their systems for the goals of efficiency and resiliency and wait in earnest for when the time comes to implement them? Is it possible to achieve these goals in parallel or prepare for them while meeting the regulatory requirements of today?

For this it needs to be understood what regulatory mandates aim to achieve. They are mostly in Client Reporting, Regulatory Reporting, Central Clearing, KYC / AML, Employee Monitoring and other similar areas.

These regulatory mandates in essence aim to bring in transparency, improve reporting capabilities in terms of timeliness and accuracy of reporting and reduce risk in business and operations. The  internal initiatives that need to be undertaken cut across the whole spectrum of functional, operational and technology domains in terms of re-establishing general ledgers, accounting rules, reconciliation platforms, repositories for reporting, database restructuring and other such initiatives.

If you look closely, these initiatives are not much different from the change initiatives that need to be undertaken for discretionary expenditures – indeed they form in many ways the bedrock upon which future enhancements whether for client engagement or for KYC or for operational efficiency can be built. The added advantage here is that there is political will – out of compulsion or otherwise - to spend more on IT. So Banks and certainly the IT evangelists in Banks can actually use this time to push through any ground level (some may call it weed level) reformative measures.

So go for it, embrace it (if you haven’t already). The regulatory pressures can actually be a godsend to the IT teams to shore up your architectures for the future..

(With inputs from my colleague, Mahendra Hingmire)