Will regional banks be changing their perception of IT (page 2 of 2)

In addition to the fundamental compliances issues, banks are also considering how changes associated with these regulations can lead to greater competitive advantage.

At the heart of proposed records retention laws as well as Basel II, regional banks will be likely to collect virtually all data around customer activity and have this information available centrally. To truly benefit, though, banks also need to have an infrastructure that allows real-time monitoring and management of risk-adjusted performance.

This will enable them to integrate the risk line of the business, which is concerned with avoiding loss, and the finance line of business, which is focused on how to outperform risk. Banks that view new regulatory changes as opportunities for improvement rather than strictures to be endured will be better positioned to benefit from them.

Packaged software solution adoption
The availability of packaged core banking solutions from both regional and global solution providers has also made a significant impact on the Middle East's banking sector. When weighing packaged solutions, banks must consider whether specific offerings include a 'customer view.'

The practice of extracting consumer data from different sources to put into a centralised customer information file can be a diluting process because information is collected in at a summary level or is out-of date and incomplete almost immediately, rendering the package a waste of investment.

However, core banking solution vendors are now providing new functionality and business advantages to organizations across the region. As smaller banks are already benefiting from the implementation of such solutions, large banks are beginning to consider them. Few banks would debate whether they must replace their legacy systems -- the answer is that they have to do it, and the sooner the better.

A number of key incentives are encouraging regional banks to overhaul their core banking systems, including regulatory requirements and competitive demands. Analysts have forecasted that 30 of the world's top 100 banks will replace their core banking systems within 10 years, and the Middle East seems likely to support that trend. Ultimately, banks require packaged solutions that enable them to focus on their core competencies, and not waste resources on developing in-house IT systems.

Top three objectives
Oracle's research within the Middle East's banking sector has revealed that financial services providers are working toward three major objectives: the development of a single operational customer environment; the development of a functional and real-time channel integration using straight-through processing principles for all process automation; and addressing the need for risk-adjusted performance measurement and management to align the balance between between risk and profit.

In addition to these goals, changes in customer demand, fluctuating costs in integration and hardware, the changing regulatory environment, and the adoption of packaged solutions, are driving major changes in the way that regional banks approach technology and the role it plays in their business objectives.