Regulation forcing banks to change IT approach, says expert

Abhijit Deb, Head of Banking & Financial Services, UK and Ireland, Cognizant

Burdened by a weight of new regulatory requirements, banks are changing the way they are deploying technology, a leading figure in IT consulting has claimed.
“Due to the lack of clarity around some new regulations, combined with the sheer volume of the requirements, there is evidence of increased use of AI-based tools and solutions to help interpret, implement and predict the impact of these regulations,” pointed out Abhijit Deb, Head of Banking & Financial Services, UK and Ireland, with consulting and IT services player Cognizant.
Deb also said that new regulations such as MiFID II have eaten into the discretionary budget of banks and other regulated entities, reducing the appetite for initiatives that need upfront investment: “Conversely, legislation has encouraged new pay-per-use and gain-share models which has boosted adoption of subscription-based cloud solutions,” he said. “We can also expect greater competition from the non-regulated shadow banking sector, as well as other intermediaries who still have strong links with the banking system, which will provide more choice for the customer.”
At a macro level, argued Deb, regulation has forced many banks to focus on more high-margin areas because in many cases, they have to absorb the associated costs: “As a result, they are forced to cut back businesses by line, geography, or both,” he added. “This has led to divestments and rationalisation of assets in terms of technology, operations and people. It has also encouraged banks to explore shared go-to-market models, to spread costs and maximise wallet share. This has been demonstrated by the coming together of entities such as LBG and Schroeder’s to tap deeper into certain markets – in this case, wealth management.”
Looking ahead, Deb said many banks are balancing Brexit planning with regulations like MiFID II, MiFIR, GSPR, PSD2, along with reforms such as Open Banking and FRTB: “Certain areas like AML, risk and security will continue to attract investment, while data will remain front-and-centre with the likes of PSD2,” he concluded. “This will require CIOs, CROs and the rest of the business to work closely together to balance all aspects of stability, risk, transparency, speed, innovation and customer experience. It will also mean more focus on regtech as an essential lever to automate regulatory interpretation, implementation and monitoring, without hampering levels of service and experience that customers are accustomed to across physical and digital channels.”

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