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By Dan Ilett, 13 October 2005 16:50

NEWS Banks are spending €100bn in a "race to renew their IT platforms" by 2010.

According to a report from analyst Forrester, 69 per cent of European banks either have plans to update applications or are already doing so to dump outdated systems and change business strategies.

Jost Hoppermann, VP of research for Forrester, told silicon: "A lot of existing banking platforms are not suitable for work now. You are seeing that systems are not at all up to performance.

"They have been modified and patched but in extreme cases [banks] have been using them for 30 years. To make these work you will need money or time. Some banks are looking at renewal because they are outdated but mainly it's because of business practices."

Just under half (forty-six per cent) of the banks surveyed have already spent around €46bn between them on software and services updates, the report said. Twenty-three per cent said they were planning to spend the same amount before 2010.

But 31 per cent of the 64 survey respondents said they had no plans to make any changes to their infrastructures, and Hoppermann said this was a reflection of their approach to customers.

He said: "It worries me that if they do not do some renewals, they will suddenly have some dramatic pressure to renew. Initial costs will be higher because of time pressure."

The analyst said the project budget requirements for software and services would be huge - as much as €250m for some larger banks - so board-level negotiations could be tough.

Hoppermann said: "If a CIO would say 'I need €100m to build a new IT system', do you think that will happen? There's an important issue here though – although these appear to be high, they would fit into the IT budget of a bank."

The analyst's findings correlate with research from accountancy firm PricewaterhouseCoopers, which said IT spending in the financial services industry is set to grow by the largest amount in five years.