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Many banks use their resources mainly for the maintenance of their IT systems. A newly-

published study by Ernst & Young, IT in Swiss Private Banking 2013, shows that the

strategic development of IT systems is being neglected. Banks are not suf ficiently

leveraging IT innovation to renew their business models and thus missing out on

competit ive advantage through technology. The survey also highl ights disparities in

earnings within banks: IT staffs earn only 65 percent of the average salary paid at the

same bank.

ZURICH, 14 MAY 2013 With banks facing growing pressure on their IT systems regarding data

security, confidentiality and compliance with regulations, Ernst & Young has analyzed the core

banking systems currently used to run the banks' core IT processes in its IT in Swiss Private

Banking study. The survey revealed that two thirds of banks use standard software in their core

banking systems. 17 percent use solutions developed in-house and an equal proportion uses

software components from external sources that were adapted to their own requirements.

Standard solutions are used by 50 percent of large banks, 60 percent of medium-sized banks

and 78 percent of small banks. Most smaller banks have no choice but to use standard

solutions. The costs and work involved in developing their own system is beyond what they can

achieve with their IT staff. But many medium-sized and large banks also shy away of theconsiderable initial costs of developing in-house solutions, says Robert Rmmler, Senior

Manager in Advisory Financial Services at Ernst & Young Switzerland.

News release

Fabienne Scholz

Ernst & Young

Media Relations

Tel.: +41 (0) 58 286 34 10

[email protected]

Ernst & Young IT in Swiss Private Banking 2013

Insufficient use made of oppor tunities for innovation in IT


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No cost savings with standard softwareOpting for standard solutions cannot, however, be explained in full by cost considerations alone.

Banks using standard software in their core banking systems spend around 15 percent of their

total operational expense on IT, with license fees accounting for much of that figure. For banks

using core banking systems they've developed by themselves, expenditure on IT only accounts

for some 11 percent. We were surprised by the fact that medium-sized and large banks opt for

standard solutions despite the higher cost. It may be that they find the additional cost acceptable

because they want their IT landscape to be less complex. If you decide not to invest in your own

development work, you tie up fewer staff and can concentrate on more-value-addinginvestments, says Robert Rmmler.

The limits of outsourcing

Of the banks surveyed, 61 percent manage their core banking systems themselves; 11 percent

outsource their IT, while 28 percent outsource whole business processes to third-party service

providers. But the study shows that outsourcing does not automatically lead to lower costs. The

banks that outsource the operation of their core banking systems spend around 15 percent of

their total outgoings on it. Where individual business processes are outsourced, the costs add up

to around 15.3 percent, while in-house management of the IT system works out cheapest at

around 14.6 percent.

Low salaries for IT staff

On average, IT workers make up 9 percent of a bank's total staff. With 12 percent, the proportion

of IT staff is highest in banks that develop their core banking systems themselves. Banks using

standard solutions have only around 7 percent of their employees working in IT. The survey also

highlights marked disparities in earnings within the banks, with IT workers earning on average

65 percent of the average salary at the same bank. The discrepancy in earnings is

extraordinary, especially when you consider the increasing importance of IT in the private

banking business. Banks wanting to stand out from competition thanks to their IT services need

to consider whether such differences in salary are still justified, says Andreas Toggwyler,

Partner in IT Advisory Financial Services at Ernst & Young Switzerland.

Focus on compliance and data security

According to the study, banks use much of their IT resources for maintaining their systems, with

day-to-day operations accounting for 73 percent of IT costs and the remaining 27 percent spent

on adapting the systems. Banks that develop their own core banking solutions spend the most -


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some 36 percent - on adapting them when necessary. Future IT expenditure is planned forcompliance and data security measures; an overwhelming majority of the IT managers

questioned (96 percent) are planning to spend their IT budget for 2013 primarily on meeting

regulatory requirements, while 87 percent of them cite improved data security as another priority.

No more than 4 percent of the respondents are planning to focus on social media.

Focusing business models on the future

Banks are concentrating on complying with regulations and on keeping their data secure. You

can't help noticing that they hardly express any further aspirations. What that means is thatthey're not using innovations in IT to create new capacities and make their clients happier by

developing new products and services. They're missing the opportunity to use IT services - be it

in e-banking or other services - to enhance their profiles and generate new revenue. In the long

term, though, it's not enough to just keep the systems ticking over and IT costs under control. If

you understand and see IT as a business driver, you can improve the data on which all your

business decisions are based and do something to help adapt your business model to the

future, says Andreas Toggwyler.

Information on the study

This study of IT in Swiss Private Banking 2013 is based on a survey conducted by Ernst & Young in the

second half of 2012, with questions answered by the IT managers of 24 banks, 16 of which were private

banks, 4 universal banks, and 4 with a broad mix of clients and products (hybrid business model). Of

those taking part in the survey, 46 percent were small banks (with less than CHF 5 billion in assets under

management), 29 percent medium-sized banks (assets between CHF 5 and 15 billion) and 25 percent

were large banks (with assets between CHF 15 and 100 billion). All of them are based in Switzerland or do

most of their business here. This is the first time this survey has been carried out in this form, with most ofthe questioning taking place during face-to-face interviews.


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The global Ernst & Young organization is a leader in assurance, tax, transaction and advisory services. Itmakes a difference by helping its people, its clients and its wider communities achieve their potential.Worldwide, 167,000 people are united by shared values and an unwavering commitment to quality.

The global Ernst & Young organization refers to all member firms of Ernst & Young Global Limited (EYG).Each EYG member firm is a separate legal entity and has no liability for another such entitys acts oromissions. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide servicesto clients.

In Switzerland and Liechtenstein, Ernst & Young Ltd is a leading audit and advisory firm with some2,100 people at 11 locations. The firm also provides tax, legal, transaction and accounting services. Inthis publication, Ernst & Young and we refer to the Ernst & Young Ltd, the Swiss member firm ofErnst & Young Global Limited. For more information, please visit www.ey.com/ch

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20130514_Pressrelease_final.pdf