Report: Financial firms' IT will miss G20 deadline

CIOs will get the blame if post-crisis changes aren't implemented on time, say financial chiefs

Changes to financial services firms' ICT infrastructure, ordered by the G20 in the wake of the financial crisis, won't be ready for the 2015 deadline, according to an in-depth study of the sector published yesterday.

The regulations require major upgrades starting this year so as to hit the 2015 target.

Financial services chiefs expect penalties for missing interim deadlines to run into tens of millions of dollars, and IT departments are likely to be held responsible, says the report.

The study by financial industry think-tank JWG, and commissioned by data centre provider Interxion, was based on interviews with financial sector practitioners, a pan-European survey of IT decision makers within banking and insurance firms, and a review of more than 4,000 pages of regulation stipulated by the G20 in the aftermath of the financial crisis.

"Many financial institutions are trying to run services on disparate systems whose complexity and inflexibility make it difficult to respond to regulatory demands," said PJ Di Giammarino, chief executive of JWG.

"But non-compliance could lead to significant fines, or even cost firms their licence to practice."

Accountability for compliance will most likely lie with IT and operations, warns Di Giammarino. "But there is no evidence they are engaging with the regulators to set the right standards.

"There is a clear disconnect between infrastructure practitioners and compliance experts which needs to be resolved fast if firms want to maintain their competitive advantage as well as comply," he adds.

JWG's survey found that 71 per cent of respondents did not believe legacy system upgrades required to meet compliance objectives would be complete by the required implementation date in 2015.

Nine out of 10 thought that penalties for non-compliance by the end of this year will run into the tens of millions of dollars.

The regulations involved include the implementation of new capital requirements as defined by Basel III and Solvency II, and reforms such as MiFID II and the European Market Infrastructure Regulation (EMIR) that will significantly affect firms' systems, controls, reporting and record-keeping ability.