Bank Islam ends IT deal with Temenos; picks rival

By Habhajan Singh
Bank Islam Malaysia Bhd (Bank Islam) has terminated its core banking system contract entered into just over a year ago with Swiss banking software maker Temenos Group AG.
Sources told The Malaysian Reserve that the nation’s first Islamic bank had parted ways with Temenos even before the new core banking system could be set up.
The contract has now been transferred to its rival, Singapore-listed Silverlake Axis Ltd.
The move might delay the bank’s IT restructuring plans mooted in 2006. However, the bank's management has insisted previously that plans were still on track for completion next year.
"Bank Islam and Temenos will have to resolve issues arising from the decision to pull the plug in this venture. You cannot rule out legal wrangling," said an industry source.
In a recent email, Temenos told The Malaysian Reserve that it "can confirm that the Bank Islam project in Malaysia is currently under review".
"Due to contractual agree-ments with our customers, we cannot offer any further comment on this particular project at this time," Temenos said in an email reply.
The project was deemed key to putting Bank Islam’s information technology plans into motion.
On Jan 29, The Malaysian Reserve reported that Bank Islam was on the verge of terminating its core banking system contract with Temenos, potentially causing it to incur millions of ringgit in losses.
The IT revamp is one of the five pillars of a turnaround plan announced in mid-2006, shortly after Datuk Zukri Samat was appointed as Bank Islam's new managing director.
His coming onboard was part of the bank's fresh start following a net loss of RM507.8 million for the financial year ended June 30, 2005, and a net loss of RM1.31 billion the following year. It is understood that several issues were raised over the project agreement signed with the Swiss banking software maker in October 2007.
In March 2008, Zukri told reporters that the bank had allocated some RM100 million to revamp its IT system, including the bank’s core banking system, which was due to be completed in 2010.
While Temenos did not say what caused the termination or what the implications were, it said in an email reply that the firm remains committed to servicing the Malaysian market and supporting its existing clients with core banking products and expertise.
"We are also pleased to confirm the recent T24 'go live' at AmBank in Malaysia," it added. On Feb 9, Temenos announced that AmBank Group went 'live' with the Temenos T24 (T24) to support its treasury division.
It said the T24 Model Bank is a packaged core banking software which includes banking best practices based on Temenos’ implementations in over 600 financial institutions and 120 countries.
This is similar to the core banking system now in dispute with Bank Islam. In October 2007, Temenos announced that its system had been selected to replace Bank Islam’s two in-house systems — a Silverlake core banking platform and an i-Flex Internet banking system — which the bank had operated over the last 10 years.

(This story appeared in The Malaysian Reserve on May 18, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)