Embattled bankers walk a compliance, BPO tightrope

Australia's banking sector is battling onerous compliance measures with some doubting whether current regulations will benefit customers, according to Westpac's business and technology solutions and services director Michael Coomer.

Coomer, who was speaking at Banktech '04 in Sydney last week, joined a number of senior banking executives to discuss key issues facing the industry including Basel II compliance, a tighter governance framework and business process outsourcing (BPO).

But for Coomer, future success is based on the ability to provide customers with a source of trust.

As a result of Basel II, Guido Kilsdonk, Capgemeni global risk management director, said financial institutions are now fully dependent on IT for governance.

The internationally defined regulation aims to prevent financial loss stemming from flawed internal processes, human error and imperfect IT systems; for banks, full compliance with Basel II is due within two years.

But most banks have to prove they are on track towards Basel II compliance in 2005. Kilsdonk claims Australian financial institutions are miles ahead in adoption compared to their international peers.

Before the move to Basel II and other compliance measures, banks turned a blind eye to certain practices during bull market, Unisys financial services manager John Billington said, but these new measures will make that impossible.

ANZ risk technology director Joseph Seychell said compliance is driving information integration.

He praised data transparency adding that if Basel II means banks are becoming fully dependent on IT systems for governance it is a positive step to forcing greater business and IT alignment.

One area where Australian financial institutions are failing, according to Unisys financial services manager Nigel Hinshelwood, is through leveraging the benefits of business process outsourcing (BPO).

Until recently, Hinshelwood said, Australian banks missed the benefits of moving operations offshore, missing out on cost savings and benefits that were enjoyed by American and European peers.

Australia was slow to catch on, he said, partly because there was no need to consolidate global infrastructure.

He said customers are looking to service providers for strategies to enable them, as an organization, to become flexible and to respond and manage change, reduce transaction and implementation cost and leverage innovation.

"This frees the IT and strategic resources within a financial institution and enables these institutions to concentrate on the customer-facing systems and new business methods. The ability to take on risk, in this manner, is a key benefit provided by BPO," Hinshelwood said.

"Business process outsourcing allows a utility to focus on business by letting it concentrate on core activities and enables a competitive battleground for financial services.

"Today's business case for outsourcing is about more than cost reduction, it is about aggregation of volume, strategic thinking and collaboration."

For Australian National Credit Union CEO Robert Nicholls the industry is all about speed.

"The challenge in banking now is how fast you perform your service; retail banking now has more to do with retail than banking."

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