Survey: Optimism within financial services falls to 3-month low
Optimism levels in the banking sector have fallen to a low of -17 percent compared to the last three months, according to the latest PwC/CBI Financial Services Survey.
The survey is the first to track optimism levels since major new regulations including MiFID and PSD2 came into force. It partly attributes this decline to a predicted spike in operating costs as a result of new regulations.
Firms typically spend 4% of their total revenue on compliance, but that could rise to 10% by 2022, according to a survey by Duff and Phelps. In addition, 70% of firms expect the focus on managing regulatory risk to increase over the coming year.
PwC attribute an increase in operating costs to increasing IT investment. A large portion is driven by the shifting cyber security mandate under new regulations. They move the mandate from annual compliance exercises to continued assurance of critical applications. Financial services institutions need to show that their systems are able to withstand attack and remain operative at all times.
In response, cyber security budgets are increasing. This often entails large sums of money being channeled towards products which automate security around legacy IT infrastructures. World Wide Technology’s Financial Services advisers are warning that this product-centric approach to assurance cannot work.
Nick Hammond, lead adviser for financial services at World Wide Technology, comments: “To meet new assurance mandates, policy has to be abstracted from the current legacy security infrastructure model and instead wrapped around individual applications, such as the payments system or credit card database.
“Additionally, banks need to have the correct processes in place, and the right people to oversee them. To adapt to the current regulatory climate in an agile, future-proof way, business application owners and compliance officers need to talk to infrastructure teams, and get a clear sense of what is going on in their systems, before putting the most appropriate solution in place,” Hammond continued.