Basel IIs impact
Regulatory requirements have proliferated madly since 9/11 and the Enron debacle, with the passage of regulations controlling data privacy, risk and compliance that include HIPAA, Sarbanes-Oxley, the Patriot Act and Basel II. That heady mix of regulations is now the biggest pain point for IBMs business intelligence customers, Parrish said. "Our customers are being driven by tremendous regulatory environments," she said. Basel II is considered by some experts to be the next Y2K or Euro conversion project when it comes to the overhauling of systems it will entail. Forrester Research pegs IT budgets for the conversion between $20 million and $30 million for large banks. In early 2003, industry estimates said that between one-third and one-half of banks were not sufficiently prepared for Basel II. Systems integration is one of the major challenges of Basel II and is likely one of the most significant hitches holding banks up, according to Jost Hoppermann, vice president of Giga Research, a division of Forrester Research.Next page: One banks Basel II odyssey.
The situation has improved somewhat since then, Hoppermann said, but there are still banks that will be caught unprepared when the final deadline for compliance arrives in 2006. "[Unprepared banks] will consequently not be able to use more sophisticated Basel II approaches, probably resulting, for example, in higher capital adequacy requirements, depending on their credit portfolio," he said.