Latency, Regulation and Stress Tests Pose Challenges, Survey Shows
Data latency and new regulation are the banking industry’s two biggest technology challenges, according to a survey from last month’s Sybase Financial Services Executive Summit in London. Respondents expect firms to spend more of their technology budget on these concerns than anything else over the next three years.
These expenditures will be unavoidable in many ways. Reducing data latency is crucial for high-frequency traders, and banks will likely have to keep more cash on hand for emergencies thanks to incoming regulations, such as Dodd-Frank and Basel III.
“No one would spend all that money if they didn’t think they could squeeze information from these huge internal data sources to get a competitive edge in trading,” Sybase senior marketing director and fellow Trading-and-Risk Technology blogger Neil McGovern told Forbes. But there is a pendulum swing at work here too.
“Wall Street and the City of London oscillate between downturn and profit chasing,” McGovern told financial IT network bobsguide, adding that the trend was toward profit chasing before the 2008 financial crisis. “Now the mood seems to be swinging back.”
Nearly all of the survey participants lacked confidence that stress tests address the banking system’s important risks, with 84 percent indicating these examinations should increase to at least twice per year. And almost everyone questioned predicted that incoming regulation will have a negative impact on future bank profitability.
“There seems to be an understanding inside the industry in London that stress testing is a valuable thing to do and it should be done frequently,” McGovern told Forbes in another article. Useful stress tests would be industry-wide, allowing regulators to evaluate all parties’ exit strategies, which could crashing the price of particular assets, he added. “That has to be a Big Data problem if there ever was one.”
The Sybase Financial Services Executive Summit was an exclusive event last month for financial executives and mobile commerce professionals. Sybase hosted the event and conducted the survey in the City of London financial district and conducted the survey …
… and it was almost as fun as doing a barrel roll.
Disclaimer: The individuals who post here work at Sybase.