If facilitating a more effective flow of information within and between financial institutions is critical to safeguarding against risk, better serving the economy and increasing efficiencies, then ensuring the security of this information is now even more important. The challenge of achieving watertight data security, inextricably linked to restoring confidence in the banking system, must be tackled head on and effective engagement with industry in a technology-neutral environment under the banner of Intellect provides the logical means to achieve this.

In light of recent high profile data losses in both private and public sectors, concerns and sensitivities about the handling of data have never been higher. Regulatory change within the industry will also pose significant data security challenges, many as yet unknown. What is certain however is that a data breach notification law for industries such as financial services, is not too far away. Additionally the FSCS’s SCV, which will be in place by the end of 2010, will heighten the security challenge for all banks as highly personal and sensitive data is collected by the banks and shared with the FSA and the FSCS.

The information security standards maintained by established banks are generally very high, however the opportunity for loss of this data is increased when it is necessarily transferred to other bodies such as the FSA and FSCS, and is subject to the usual pressures of fraud – often by employees within the bank. Similarly new entrants to the market must also ensure that their own information assurance programmes are at least at the standard of their more established competitors, as the reputational damage that a data breach could have could be terminal for a bank that is in the process of building its reputation in the industry.

The reputational impact that a data breach notification will have on any operator within the financial services industry will be severe, regardless of whether it is the bank or the regulator that is responsible for a breach.

Intellect believes that there is an onus upon the financial services sector, which is examining every avenue to keep costs down as the economy recovers, to not short change its information security programmes.

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