Barclays has made a first-of-its-kind deal with US based STP solutions company SunGard to cut IT costs by 20 per cent.
The news that Barclays is handing over some of its regulatory reporting obligations and post-trade processing to SunGard comes just days after Anthony Jenkins (Barclays’ chief executive) said that he was losing patience with the poor performance of the investment bank and threatened to make further cuts if profits did not increase.
According to the FT, SunGard will begin carrying out futures and over-the-counter derivatives operations, technology processes and regulatory reporting from the second quarter. No details were given about the number of Barclays’ staff who will move to SunGard’s utility provider, which is hoping to tap into a $250bn markets across around 100 brokers and banks.
Tim Stack, head of agency derivatives services at Barclays, said “Barclays has always taken a proactive approach to managing its business and adapting to regulation. By taking this leadership position with SunGard, we are able to provide our clients with a practical solution that keeps our products and services at the forefront of the industry. We are confident that this utility is a transformational change for the industry, and that it will help provide clear benefits to our clients, to Barclays and to the industry as a whole.”
Ray Kahn, Managing Director at Barclays said that Barclays is looking for cost savings across the entire group and that this is one of numerous projects going on. He also added that the cost savings from the deal with SunGard would be substancial.
The decision to outsource post-trade processing activities to SunGard is significant for Barclays because this is the first time such activies have been carried out by a third party. Banks and brokers have been dealing with an enormous amount of reporting and processing costs since new regulations such as the European Market Infrastructure Regulation, the Dodd-Frank Act in the US and Basel III have been introduced.
Brian Traquair, executive vice-president, SunGard Financial Systems said the new OTC post-trade utility will offer a more efficient way for banks and brokers to deal with ever increasing demands of regulation because SunGard could tap economies of scale.
“SunGard’s post-trade derivatives utility will help transform the cleared derivatives middle and back office across the entire industry, resulting in a more sustainable operating model and cost structure for the future,” said Traquair.
Read the full release about SunGard's new utility here.