With new rules on reporting financial assets and liabilities taking effect this year, European banks must move quickly toward compliance. To help banks comply with the new International Financial Reporting Standards, SAP rolled out software that centralizes financial data in a common database and eliminates the need for manually compiled spreadsheets. SAP says the software is now being used at several European banks.
A significant percentage of bank spending on IT is focused on compliance because they have to deal with a number of new regulations, including the Sarbanes-Oxley Act, the USA Patriot Act, and Basel II. Last year, 3.8% of IT budgets went to compliance. That's expected to jump to 4.6% in 2006, according to a report released in January by research firm Datamonitor.
The IFRS, legislation passed by the European Union to regulate how banks report their financial assets and liabilities, went in effect for publicly listed European banks in January. Now more than 90 countries are moving to the standards, which means there is a growing need for banks to establish policies around their financial assets and liabilities, such as stocks, bonds, and loans.
SAP for Banking is designed to address the IFRS. The software combines the mySAP Business Suite with a set of automation tools for managing front- and back-office banking operations, such as transactions, customer relationship management, financial accounting, cost controlling, and profitability and risk analysis. It also includes a centralized financial database that creates a full audit trail and lets banks valuate, post, and report their financial assets on a single platform.
"The use of centralized technology such as the one that SAP offers that are guiding financial services to comply with regulatory requirements are very much in strong demand," says Jacob Jegher, senior analyst with research firm Celent Communications.
At this week's Sapphire 2005 event in Copenhagen, SAP said the first customers to go live with the new application are mainly banks in Italy and Germany. "There is no IT activity that is happening right now in a bank that doesn't take into effect regulation or compliance," Jegher says. "It's in their top three concerns when it comes to their operations regardless of what IT functions they're looking at."