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The largest U.S. banks (those with assets of $80 billion or more) have historically used an individually tailored approach to core banking systems, employing a mix of processing systems developed in-house with product line solutions from a range of different vendors. While these "best-of-breed" systems provide a high degree of functionality, they lack vital integration with the other core applications. Yet even despite this, new research from TowerGroup finds that the largest U.S. banks continue to show no indication of adopting new integrated core systems.

While the major banks aren't moving toward integration, many community banks, thrifts, and credit unions with less than $10 billion in assets already handle the bulk of their processing via a single integrated system. TowerGroup estimates that 40% of banks with assets ranging from $10 billion to $80 billion currently leverage an integrated banking system for core deposit and loan processing.

TowerGroup expects the largest banks to continue selecting core banking systems on a product-line basis, bypassing the opportunity to implement a new integrated banking solution. As they forego the benefits these systems would provide, the industry can expect to see them continue to invest in new software to overcome the limitations of best-of-breed systems.

A new TowerGroup report titled, "Not Coming Soon to a Large U.S. Bank Near You: A New Integrated Core Banking System," by Robert Hunt, a senior analyst in the Retail Banking research service, provides an overview of the evolution of core systems at large U.S. banks, discusses the availability of new integrated core banking systems, and explains why these systems are not being purchased by the largest players.