Legacy infrastructure will fail to meet regulatory compliance objectives, say over 70% of Banking & Insurance professionals
March 14, 2012 - INTERXION HOLDING NV (NYSE: INXN), a leading European provider of carrier-neutral colocation data centre services, today announced the results of an independent study and whitepaper by financial industry think-tank, JWG. The research is focused on the impact of anticipated regulation of the financial services industry on the ICT infrastructure requirements of banking and insurance firms across Europe.
The research - based on interviews with select industry practitioners, a pan-European industry survey of IT decision makers within banking and insurance firms and a review of more than 4,000 pages of regulation stipulated by the G20 in the aftermath of the financial crisis. These include the implementation of new capital requirements, as defined by Basel III and Solvency II, and reforms such as MiFID II and the European Market Infrastructure Regulation (EMIR) that will significantly affect firms' systems, controls, reporting and record keeping ability. These regulations require major upgrades starting in 2012 and rippling across industry sectors for the rest of the decade.
The study found that a massive 71% of respondents did not believe that legacy system upgrades required to meet compliance objectives would be complete by the required implementation date in 2015, while an overwhelming 90% stated that penalties for non-compliance by the end of this year will run into the tens of millions of dollars.
With 40% of respondents saying they lacked confidence in the ability of their overall ICT infrastructure to comply with upcoming regulations, 30% said they would need third-party data centres to fulfil compliance and security requirements, whilst also being able to reduce operational risk capital buffers.
PJ Di Giammarino, CEO, JWG said: "Many financial institutions are trying to run services on disparate systems whose complexity and inflexibility make it difficult to respond to regulatory demands. But non-compliance could lead to significant fines or even cost firms their licence to practice."
He added: "The accountability for compliance will most likely lie with IT and operations, but there is no evidence that they are engaging with the regulators to set the right standards. There is a clear disconnect between infrastructure practitioners and compliance experts which needs to be resolved fast if firms want to maintain their competitive advantage as well as comply."
Kevin Dean, Chief Marketing Officer, Interxion commented: "The impact of the G20 regulatory reform on financial institutions' ICT infrastructure requirements will be significant and it is clear that firms need to invest in the 'correct' technology. Building internal data centres is no longer an option for many firms due to capital restraints emanating from Basel III and Solvency II and the prevalence of legacy systems. Therefore banks and insurers are increasingly re-thinking their data centre strategies and considering the externalisation of their facilities."
He added: "This research from JWG highlights the role suppliers can play in better supporting industry requirements and in helping banks and insurance firms navigate the vast terrain of legislation. Interxion is committed to understanding the impact of regulation on our customers in detail and to offering the appropriate solutions."
Interxion data centres provide fully compliant professional environments for mission-critical business applications, offering the stringent levels of security, reliability and performance required by the financial services industry. They also allow financial institutions to avoid investment in non-core activities without relinquishing control over ICT systems and processes.
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