Deadline for Basel II compliance in the banking sector is January 2008, and while South African banks are on target, they are still not seeing it as a competitive advantage, says Laurence Trigwell, senior financial services director for EMEA at Cognos.
"The initial cost factor of becoming Basel II compliant is incredible," he says. However, banks both locally and globally are spending fortunes on risk management systems.
Trigwell says that in general, European banks can spend up to EUR88 million, and Althea Bacchialoni, research manager for banking at BMI-TechKnowledge, says local banks can spend anywhere between 10% and 16% of their annual turnover on IT products, which include risk management options.
"Banks not only like to spend money on risk management, they now also have to in order to meet the requirements set out in the regulatory mandate," says Trigwell.
However, he says compliance is not only about risk and even though banks have spent money on the risk management systems, there is a long way to go.
"Only one-third of the banks are thinking about Basel II compliance on a broader scale," says Trigwell. "They have spent the money, now they must look at how to make it become a competitive advantage.
SA tech-savvy
Trigwell says banks across the world followed the same pattern, although local banks have more going for them.
"South African banks are extremely sophisticated when it comes to technology," he says, adding the banks use more technology channels, such as cellphone and online banking, than most of their international counterparts.
Bacchialoni says: "South African banks are technologically sophisticated because they are not afraid to try new technology."
Trigwell says local banks could be doing more to link future plans to current performance, and do it in a co-ordinated manner: "This will be the differentiator between banks who are competitive and those who are not."
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