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Bank ringfencing will create IT jobs boom – but only after 2016

Leo King | Dec. 22, 2011
The Chancellor's acceptance yesterday of the Vickers Report, which recommended banks separate their retail and investment units in the interests of stability, will require billions of pounds of IT and operational investment from banks.

Ben Wilson, head of financial services at IT industry association Intellect, said there was only such a large amount of IT work awaiting banks because the Vickers report did not take the simpler option - of using better data analysis to predict problems.

"Intellect has long said that ring fencing retail banks is an expensive and complex duplication of effort, and the same results could be achieved by giving banks and regulators the tools to collect, analyse and understand risk data, complemented by ongoing efforts to allow banks to fail in an orderly fashion," he said.

The government needed to "carefully consider" the role of the technology industry, "which provides the platforms and innovation upon which the financial system is built", he said. It should assess how the industry can provide the right tools "to reduce the impact that implementation will have on customers and the wider economy".

Skinner said data analysis was a problem, especially as investment banks conducted high frequency algorithmic trading. Banks needed to urgently fund work in this area, he said.

"There are a lot of discussions around FGPA [field programmable gate array] circuits, a type of programmable circuit that could be used to improve real time data analysis around high speed trades," he said. "The analysis does need to do some catching up with the trading itself."

But Ralph Silva, managing director at analyst firm SRN, said that analysis would be eased by splitting the banks - even if the split itself does initially require a large amount of work.

"If banks are in smaller pieces, than we will have to intervene earlier because banks will not be able to use the funds from one side to support the other," he said. "The result would be that we identify problems earlier and that ultimately we would fix them sooner and use less money."

 

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