Outdated core banking infrastructure is hampering the performance of Europe’s banks, despite the increased importance of such infrastructure in the post-crisis era, according to new research by the Belgian technology firm Callataÿ & Wouters. Consequently, the firm says many firms will be forced to up their spending in this area despite the difficult economic environment.

The research looked at how IT decision-makers in banks across the UK, France and Germany are approaching investment in core systems following the crisis, and found that 69 per cent of respondents were still operating with systems that are between 11 and 30 years old. Meanwhile, around two-thirds thought that core banking systems were now more important than before the financial troubles of recent years set in.

The result of this, according to 57 per cent of respondents, is that “banks have had to adapt their business around legacy technology rather than using flexible technology which adapts to banks’ needs”. This has led to reduced flexibility and increased costs, according to the research.

Given European banks’ outdated systems, and the growing demands upon them, 44 per cent of respondents said they plan to increase spending on their systems over the next two years despite the current economic climate, said Callataÿ & Wouters.

“The most popular way of approaching investment is by business line (59 per cent) with accounts, capital markets and payment & cards being the top priorities for investment. Increasing competitiveness is the main business driver for investing in core banking systems overall, followed by meeting regulatory initiatives and risk management,” according to the firm.

Looking at a national level, German CIOs were the most “progressive”, followed by those based in the UK – with the French the most “reticent”, said the research note. Particularly, 54 per cent of respondents in Germany had overhauled their core banking infrastructure in the last five years, compared to 14 per cent in the UK and 7 per cent in France. These results could be linked to the fact that German banks were far more likely than French banks to have undergone a merger or acquisition recently, said Callataÿ & Wouters.