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17/10/03

2006 Basel II deadline creates huge opportunity for VARs, but they must prove they understand the issues, warns Intellect

With the deadline for Basel II Accord recently confirmed as staying fixed at 2006, the financial services sector is under increasing pressure to ensure that its ICT systems are prepared for compliance, creating a huge opportunity for the value added reseller (VAR) community.

But Intellect, the trade association for the UK hi-tech industry, has today issued a warning to those VARs anticipating a growth in business, stating that they will be making a grave mistake if they become complacent about winning this business.

Speaking following the first in a series of Basel II Preparedness meetings John Higgins, Director General of Intellect said, "ICT providers are still perceived by the financial services sector as having little understanding of the issues involved in Basel II compliance. As a result of this they are not being invited to contribute to the scoping process that many Financial Services institutions are currently undertaking. These organisations are auditing their people and processes, and conducting a gap analysis between what software and systems they have and what they need, a process which more ICT providers should be involved in."

"For VARs to reap the rewards that Basel II offers they need to convince the financial services sector that as a partner they really understand the business issues involved and can align solutions to complement business strategy. By proving their knowledge they will put themselves right at the very heart of Basel II, and will be in a position to drive IT spending, which is expected to run at €115 million for each large bank over the next five years."

For VARs hoping to make the most of this opportunity the good news is that ICT is essential for compliance with Basel II, and in addition the added need for speed brought on by the looming 2006 deadline makes outside suppliers far more attractive than in-house solutions.

And no one has missed the boat - there are still opportunities in the market, which hasn’t yet opened up. Intellect has identified the following areas of opportunity and challenge:

• There is a huge opportunity for VARs in developing risk managed defined capabilities and services.
• Operational Risk management systems must satisfy regulators, investors and shareholders, and accommodate financial service institutions at every stage of the process, from blank sheet of paper to sophisticated framework.
• There is currently an absence of good data for managing Operational Risk; financial services institutions are moving away from modelling to a more holistic view.
• The ICT industry will be have to deliver complex systems that are reliable, integral and flexible - and they will have to share the risk of failure.
• Those VARs who are able to deliver these benefits will be in a strong position to take advantage of the opportunities in other sectors, as more and more regulation puts an increasing burden on an increasing large section of industry.

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