Regulators say banks should cut risk reporting times to 24 hours.
Banks’ existing IT infrastructure is not good enough to meet regulatory requirements, according to an SAP study.
The German tech giant blamed poor IT systems for a ‘large disconnect’ between regulators’ expectations and banks’ ability to meet compliance requirements.
Irfan Khan, SAP’s senior VP for database and technology, said: "Banks have limited themselves from doing things [by not taking advantage of big data]. But in banking it is both a necessity and a strategic advantage.
"What tends to happen is there’s a lot of legacy infrastructure and you get very segregated environments. But attempts to address elements of that complication have really not been very successful."
The company’s research, which included a survey of 1,500 alumni of the Frankfurt School of Finance, found that 77% believed technology would help them comply with regulators faster, but they are struggling to do so.
Regulators told SAP they want to establish a 24-hour timeframe to receive financial information within, but Khan said data silos are holding banks back.
"Think of the different types of workloads that would ordinarily be in place, such as ERP, and then take a look at the regulatory reporting environments that banks have," he told CBR. "Commonly thosehave been very separate so it’s harder for banks to keep the two in sync.
He added that banks with such data silos risk their information becoming so out of date it is no longer useful for regulators, but could improve by using a "consolidated" environment that would make it easier to transfer financial data to regulators.
While 61% of respondents said their banks plan to increase IT budgets by at least 25% over the next three years, they appear to prioritise mobile banking over cloud and in-memory databases, with six in 10 saying mobile is the future for banking, with in-memory following it with 48% and cloud with 47%.
However, Henry Cook, principal consultant for SAP HANA, the firm’s in-memory database technology, said: "Banks care about customer insight, they’re very much concerned with the regulatory environment and also about cost. We’re using big data to give banks the ability to assess trading risks within the day, even second by second."
Regulators told SAP in its study that any new IT infrastructure must provide the ability to run ad-hoc stress tests as well as timely and detailed balance sheet data.