The financial services industry spent billions on being able to trade faster and to make more money, but not nearly enough on creating the necessary transparency.  Technology also may have contributed to the ‘deskilling of the risk process’.  Particularly those employees who reviewed the on-screen loan applications forms were not given proper incentives to verify the data.  One particular bank had a surprising high number of ‘astronauts’ applying for loans, because this job description was the first choice on the pull-down menu.  Just one example why banks have a problem with data quality.  Too much reliance on models and less on human skills, therefore computer-generated risk numbers gave bankers a false sense of security. 

Have banks learned their lessons?   Perhaps.  Some of them are now investing in integrated systems of the kind a few banks, such as Goldman Sachs, JPMorgan Chase and Deutsche Bank had in place before the crisis.  Nevertheless many banks are still in the fire-fighting mode and IT investments are still going into applications that make processes even faster.  That can only mean that in the next crisis things may unravel even faster than what we experienced in the most recent one.  Source:  The Economist

BIIA Newsletter January 2010 Issue