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November 22, 2010

Low integration of risk management at European banks, report says

European financial institutions are unable to see a unified view of the performance and associated risk of their different business units, says a report from IT firm Oracle. A lack of transparency and failure of business intelligence has affected European banks’ confidence in being able to react to changing market conditions and regulatory requirements, Oracle says.

Oracle’s views, which are based on a survey of 222 senior IT executives and 228 senior business managers at banks across Europe, are published in “The European Confidence Report”.

“The majority of financial institutions have information silos based on disparate legacy systems within their business,” Nazif Mohammed, European, Middle East and Africa (EMEA) vice president at Oracle Financial Services, says. “This means they are unable to place the emphasis on risk management that is required to operate in the current volatile market.”

The vast majority (85 percent) of survey respondents said they did not have performance management systems that were completely integrated with risk analysis systems, while almost half of all participating banks said they were not confident of the accuracy of their risk data and counterparty-related data.

Surprisingly, 41 percent of financial institutions that don’t currently assess risk and performance together said they were not seeking to actively incorporate risk into decision-making. This situation existed, even though 86 percent of respondents were expecting to see an increased regulatory load on their organisation.

“The next set of guidelines from global regulators, Basel III, addresses liquidity risk, stress testing, loan loss and capital forecasting,” says Senthil Kumar, vice president at Oracle Financial Services Global Business Unit in Europe. “The regulation will require financial institutions to further strengthen and unify their risk management and finance processes to avoid repeating the same mistakes that we have seen in the last few years.”

 

 

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