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Bank IT spending will grow only slightly

Risk will be the top concern for banks this year as they look to get more out of their risk management systems, research firm says.

North American bank IT spending will grow to $50.3 billion this year, a slight increase from $49.4 billion in 2008, according to a recent report by Celent LLC, a Boston-based research and advisory firm focused on the financial-services industry. A bulk of the spending will go to maintenance while banks focus on getting more out of their risk management systems, the firm said.
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While the growth of IT spending by North American banks will decline for the second year in a row, absolute spending figures continue to rise, according to the Celent report. About three-quarters of the total IT budget is dedicated to maintenance, but spending on post-merger integration work is on the rise, and small to midsize banks will invest more in IT to gain market share, the firm said.

In the U.S., bank IT spending will reach $43.5 billion this year, up a bit from $42.9 billion last year, Celent estimates.

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Risk will be the top concern for banks this year and they will aim to get "more use and intelligent information" out of their risk management solutions "instead of simply focusing on the fact that they need to be there for regulatory reasons," wrote Jacob Jegher, senior analyst with Celent's banking group and author of the report.

"The financial crisis exposed flaws in managing risk in a siloed manner and will increase the imperative to manage linkages more intently between risk factors and units, especially when product complexity and infrastructure constraints expose a firm to critical cross-risk dynamics," Jegher wrote.

There will be "a greater alignment of loosely coupled risk management activities and information data sources," he wrote.

Other technology banking trends this year will include engaging customers in new ways via Web 2.0 technologies and Internet banking, mobile banking, and offering remote deposit capture to retail consumers, not just commercial clients, according to the report.

But U.S. banks -- especially large ones -- are tightening their belts in the economic recession and internal competition for IT resources will be stiff, Jegher said. "IT dollars will be hard to come by after compliance/regulatory spending and maintenance expenditures," he said in a prepared statement.

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