Compliance and regulatory reporting remain the largest factors driving reconciliation for top-tier financial institutions, including many with significant operations in Africa, according to a study released by SunGard and Aite Group.

The study titled ‘Reconciliation Centers of Excellence: An Assessment of Quality’, reveals that two-thirds of top-tier financial institutions have established reconciliation centers of excellence (CoE), following a recent wave of consolidation of the reconciliation function within these institutions.

Richard Chapman, Head of Strategy for SunGard’s reconciliation business, said: “While we’ve seen increased adoption of the CoE model among major financial institutions, including in South Africa, there is definitely room for growth and improvement.”

The speed at which this book of work can be addressed varies, but the average time taken to deliver new production reconciliations is around 64 days.

“When we consider that, in Africa and the Middle East, nearly 40% of respondents to our survey took more than 30 days to onboard a new reconciliation and almost a quarter took over 60 days, it is clear that we have more work to do to encourage firms to streamline the process,” Chapman said.

Despite great strides in consolidation, there remain one third of financial institutions with more than three in-house built reconciliation tools, and almost the same with more than three vendor supplied tools.

According to the results, 81% of respondents stated that they are employing a tactical approach to all or part of their reconciliations.

The study also reveals that 12% of firms with established CoEs reported more than 40% in cost savings, whereas a majority of respondents experienced at least 20% in savings.

Chapman added, however, that it’s no longer just about cost cutting: “We believe that financial institutions with true CoEs for reconciliation are at a real strategic advantage.”

“We are seeing increased awareness of the importance of a single reconciliation platform with 87% of African and Middle Eastern respondents planning further consolidation in the next 12 to 24 months,” he said.

Regulation, and in particular Basel III and MiFID, are forcing middle- and back-office processes to adapt to an intraday environment.

The majority of respondents (68%) stated real-time reconciliation support was important.

Virginie O’Shea, Senior Analyst from Aite, said that regulatory reporting is expanding asset coverage, and increasing the frequency of reconciliation: “However, internal and system-to-system reconciliation now represents the next frontier for centers of excellence.”