Banking reforms could expand IT contractor demand

In June 2010, the Chancellor of the Exchequer announced that a complete root and branch review would take place of the current banking system, carried out by the Independent Commission on Banking (ICB), chaired by Sir John Vickers. On the launch of the review, Sir John Vickers said:

“Some say that it’s unwise even to debate structural reform of the UK banking sector. We firmly disagree. Experience shows that the risks from not asking hard questions about financial stability are far greater than from doing so. Sweeping them under the carpet would do no good for long-run confidence. Far better to debate problems in an open, rational way. So we are keen to stimulate as wide a debate as possible, and we hope that anyone with an interest will feel able to provide views and evidence in response to the questions we are asking today.”

A year on, and the much-reported ring fencing of consumer banking has been confirmed as a key component of the Government’s new strategy on banking. The IT industry association Intellect has also said that the report opens a potential new market for IT contractors, as the banks will have to vastly improve their data gathering and analysis to meet the new Government regulatory demands.

Keith Saxton, Chairman of Intellect's Financial Services Programme, and IBM director of global banking and financial markets said: "If the full set of reforms suggested by the ICB were to be implemented tomorrow, we would still be in the situation that the next financial crisis could be upon us and both the banks and regulators would be none the wiser until it was too late to act to avoid it. Yes, a ring fence would protect the economically critical processes that banks house, but if the investment banking arm of a universal bank fails, the negative consequences on the wider economy will still be significant. It is another missed opportunity for both the regulators and banks themselves to improve the markets infrastructure.”

The lack of data on the financial products that the banks were selling has been identified as a major cause of the banking crisis. For IT contractors in this sector, it looks likely that they will see an upswing in the demand for their services as the banking industry realises that robust data analysis is required moving forward. This is particularly important within the investment banking arms of the major banks, as Saxton highlighted. More detailed insight into the potential consequences of the investment that are made is vital. The IT contracting market can certainly deliver that insight.

Intellect’s Ben Wilson, head of financial services programmes at Intellect, said: "You have to look at why the crisis hit the depths it did in 2008 and why the government was required to bail out the banks in the first place. By focusing on loss absorbency and a ring fence for retail banking operations, the ICB has failed to address a crucial issue – the poor standards of risk data within banks – which, as a result, meant that both they and regulators simply did not know what risks they were holding.”

Indeed, McGregor-Boyall – the financial recruitment service provider have stated that they believe in the aftermath of the Vickers report, we will see an increase in demand for IT consultants. Speaking to ComputerWorld UK, Laurie Boyall, Managing Director at McGregor Boyall said: “[Financial institutions rethinking IT strategies] will inevitably lead to a renewed spike in demand for IT specialists – particularly contractors – to work on large-scale projects, which will be driven by compliance and risk issues rather, than investment in new systems.”

Also, in McGregor-Boyall’s financial services IT jobs report, the highest number of vacancies were in the area of risk that equates to 16 per cent of the IT requirements in the sector. This adds evidence that the Vickers report will indeed have a positive impact on IT consultant recruitment, as the banks realise that to meet their new responsibilities, more IT consultants must be used to identify risk within their organisations.

David Howell