Two-thirds of top-tier financial institutions have established reconciliation centers of excellence (CoE) following a recent wave of consolidation of the reconciliation function within these institutions, according to a study released today by SunGard and Aite Group.
Compliance requirements continue to place pressure on firms. Forty percent of respondents said compliance and regulatory reporting were the largest factors driving reconciliation, as institutions race to work through a significant backlog of reconciliation requirements.
The speed at which this book of work can be addressed varies, but the average time taken to deliver new production reconciliations is around 64 days. This is inhibiting their ability to successfully reduce the book of work.
Despite great strides in consolidation, there remain one third of financial institutions with more than three in-house built reconciliation tools, and almost the same with more than three vendor supplied tools. Eighty one percent of respondents stated that they are employing a tactical approach to all or part of their reconciliations.
“While we’ve seen increased adoption of the CoE model among major financial institutions, there is definitely room for growth and improvement,” said Richard Chapman, head of strategy for SunGard’s reconciliation business. “It’s no longer just about cost cutting; financial institutions with true CoEs for reconciliation are at a real strategic advantage.”
Regulation, and in particular Basel III and MiFID, are forcing middle- and back-office processes to adapt to an intraday environment. The majority of respondents (68 percent) stated real-time reconciliation support was important.
Virginie O’Shea, senior analyst from Aite, notes that “Regulatory reporting is expanding asset coverage, and increasing the frequency of reconciliation. However, internal and system-to-system reconciliation now represents the next frontier for centers of excellence.”
Additional takeaways from the study included the following: