US bank spending on Basel II-related risk management IT will increase 30% over the next two years to exceed $1bn in 2009, according to Boston-based research consultancy Aite Group.
The research predicts that spending on IT for Basel II initiatives will increase from around $805m in 2007 to over $1bn in 2009.
Spending on software is expected to increase from $282m in 2007 to $373m in 2009, while expenditure on hardware is expected to rise from $60m in 2007 to $80m in 2009. However spending on integration is expected to take up the majority of Basel II budgets, as it rises from $463m in 2007 to $612m in 2009.
The study examines how banks' investments in alternative instruments are driving the need for risk management tools. However Aite says it expects slow movement to Basel II initiatives, as US regulators are still soliciting comment letters on specific initiatives and guidelines remain too ambiguous to instill spending on Basel II.
"Only the largest banks are moving towards Basel compliance, while regional banks continue to operate with a business-as-usual mentality," says Adam Honoré, senior analyst at Aite Group. "The only exceptions are those regional banks that feel they may want to opt into capital accord requirements to avoid adverse selection, or receive second-rate credit that gets turned away from top-tier institutions."