The expected new regulations will more deeply affect operations than those of Sarbanes-Oxley, which targeted the CFO and other C-suite executives. Baskin expects the new requirements to apply to all transactions in financial and retail accounts. And that means more work for IT, he says: "The [technology] infrastructure has to scale with the increasing productivity."
Global regulations likely to make compliance more expensive for IT
As governments discuss how to reshape regulations to prevent a recurrence of the current financial meltdown's causes, global or at least multinational regulations are likely, in addition to local rules. If this comes to pass, rationalizing various worldwide banking systems could become a huge headache and challenge for IT.
"When you have a US bank doing business in London or Tokyo and the US says it is going to back some of these toxic assets in a different way than Asia, nobody has figured out where all these rescue plans overlap with each other," says David Wright, director of financial service for Software AG, an enterprise software provider.
Wright says that the current international regulatory agencies, like the International Monetary Fund and World Bank, will either have to reinvent themselves or be replaced with new agencies. Either way, that means regulatory changes are very likely -- and IT will have to implement the new rules.
Although financial institutions already devote significant IT resources to compliance requirements, they may have to devote a higher proportion as global rules come into force, Wright says. However, "IT won't be given any more money. They will have to take it from existing budgets unless they can produce a return on investment and business case based on consolidation and rationalization," he adds.
IT has already gotten a taste of how to handle such new requirements, due to regulations like Sarbanes-Oxley, notes Michael Mills, director of professional services and systems at the consultancy Davis Polk & Wardell. For example, IT has already found the money for e-discovery, which had been a nonexistent expense just a few years ago and now collectively costs companies US$1.5 billion. Mills sees IT having to find even more resources for compliance as the response to the financial crisis brings on more and more regulations.