Financial Institutions Seen Spending $362 Billion On IT Next YearFinancial Institutions Seen Spending $362 Billion On IT Next Year

Global financial institutions will spend $362 billion on IT investments in 2005 with different sectors experiencing different rates of spending growth, according to a study released Wednesday by the TowerGroup.

The advisory research and consulting firm said IT spending in the global banking industry will increase 4.4 percent with 72 percent of the spending to occur in the European Community and North America. Tower said consumer banking will dominate spending globally. The firm predicted that consumer spending will continue to represent the largest share of IT spending while wholesale banking will experience a continued recovery during the year.

As for the securities and investment industry, TowerGroup projects IT spending in the segment will grow 4 percent during 2005, partially driven by a return to markets by investors who were burned by declining stock markets a few years ago. Market structure changes and regulatory intervention also caused a slowdown between 2001 and 2003 that resulted in a negative seven percent growth rate of seven percent, according to the firm.

The picture in the U.S. insurance industry is not as rosy with spending expected to remain relatively flat from 2004 to 2005.

"The recent intense regulatory scrutiny of the securities and investments industry has proven to be a significant and negative distraction from core business issues," said Deb Smallwood, the firm's vice president of insurance practice, in a statement. "In 2005, the insurance industry will face its own array of compliance and regulatory pressures."