Costs surge for Asian banks
as Y2K staff go
By Bernard O'Riordan
Asian banks, wearied by their continuing battle to stay afloat, are
facing severe cost blow-outs in tackling the Y2K bug problem due to an
exodus of key talent to Australian and North American banks.
According to the first comprehensive analysis of the effects of Asia's
economic crisis on the banking industry, banks in the Philippines and
Thailand face the biggest uphill battle to fix the Y2K software glitch.
Banks in Singapore and Hong Kong were considered satisfactorily on
schedule.
Singapore-based research house, The Asian Banker Journal, said that on
average banks spent the equivalent of 6 per cent of their 1997
operational expenses tackling the Y2K problem over a three-year period.
However, most were likely to experience a cost over-run of 30 to 50 per
cent year on year.
"There are signs of severe strains in budgets and schedules where the
year 2000 issues are concerned," said Ms Carol Wheatcroft, the senior
researcher and co-author of the report.
"This increase in spending is also growing, due to the serious
brain-drain occurring with Asian banks' key IT talent being lured away
by higher-paying North American and Australian banks.
"We came to the conclusion that banks in the region, specifically from
the Philippines and Thailand, were doing too little too late."
The survey assessed the overall effect of Asia's currency crisis on key
business areas such as IT investment. A total of 52 banks responded to
the survey, including those in Hong Kong, Indonesia, Malaysia, the
Philippines, Singapore, Thailand and Vietnam.
Banks in Singapore and Hong Kong were found to have the highest IT spend
per employee in the region. They were faced with higher labour costs for
the size of their businesses and, as a result, chose technology as a way
to migrate operational costs.
Because Indonesian and Thai banks had a big and inexpensive labour pool,
the impetus to invest in technology was not strong. Those banks have
also been throttled by the Asian economic crisis which has made funds
scarce and diverted attention away from Y2K.
Most banks benchmarked their IT spending, human resources and other
operational needs internally against their own year-on-year spending.
"This does not augur well for institutions that want to compete in a
global and liberalised environment," said co-author Mr Emmanuel Daniel.
afr.com.au
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