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IDC Predicts Number of Banks Will Shrink 4% in 2010

A focus on risk and regulation will drive many surviving banks to invest in data management projects to create a single version of truth, the analysts say.

IDC analysts predicted today that bank failures will continue this year and the number of banks around the globe will drop by 4%. In a complementary prediction, the group foresees risk, compliance and regulation consuming the resources of financial institutions this year.

In the U.S., "as the economy recovers, the pace of failure will slow in second half," said Marc DeCastro, research manager, community and consumer banking, in a briefing this afternoon. He envisions more government bailouts this year, no big bank being allowed to fail, and a large Canadian bank buying a regional U.S. bank to establish a presence here.

Risk, compliance and regulation will continue to dominate banks' management and technology agendas, according to Dana Wiklund, research director, risk management. "Financial institutions will have to make immediate improvements to data structures for enterprise risk management," he said. Although the economy is recovering, the financial crisis has left many banks scarred, he said, and many are focusing on aggregating views of credit, market, operations and sovereign risk. "Financial institutions have ramped up their data warehouses, data interpretations, and outsourcing in cloud computing to make their enterprise risk management assessments more accurate," he said.

North American banks will compete furiously for corporate business this year, projected Aaron McPherson, practice director, payments, as they seek to attract large corporate deposits. And the Credit Card Act [which takes effect in February] will have a profound impact on credit card issuers. "It will put pressure on small issuers that don't have the scale to stand a reduction in their ability to raise rates and fees," he said. "Consequently, the number of North American issuers will decrease 5% in 2010."

Banks will kick off major projects this year to create single versions of the truth, according to David Potterton, vice president of global research. He believes banks will rework their data infrastructures and find opportunities to both reduce technology cost and improve control over data. "Data has become more prolific, faster in speed, and many institutions have seen an explosion of growth in data." Many institutions will be investing in large-scale data management products from firms like Oracle, IBM, and Terradata, he said.

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