Are mainframes an indicator of bank reliability?

I was on a call with Broadcom last week. Also on the call was a bank representative who talked about how their use of a mainframe computer was related to their commitment to security, reliability and availability for their customers. In an earlier IBM call with some banks, they all indicated that using the mainframe also helped them make better decisions.

These conversations made me wonder if the recent bankruptcies of Silicon Valley Bank and First Republic Bank had something to do with them using mainframes. While this is a small sample, none of the failed banks (according to this report) used mainframes, while JPMorgan Chase & Co., the bank that bought First Republic, does.

There’s a good chance that banks that use mainframes prioritize low risk, while banks that don’t may be more willing to take unreasonable risk. With people currently concerned about where to keep their money safe, one of the questions you should be asking is, “Do you use a mainframe for your mission-critical applications?”

We explore the relationship between mainframes and banking risk. Then we close with my product of the week, a small device that could make your smartphone battery last forever. I had my doubts, given the look of the device, but it works as advertised.

Mainframe administration challenges

The first big company I worked for was IBM. This was right at the birth of the PC, and back then, compared to PCs, mainframes sucked. Do not get me wrong. Mainframes used to be much more reliable and secure, but you needed MIS (now called IT) to do it all for you. That organization seemed to like to screw up every request and use an execution schedule measured in years.

We used to joke that to get anything out of MIS you had to sacrifice a chicken and dance naked around a fire, although HR froze to do that, so we never validated the theory. With a PC and later a server, you could get things done much faster and meet your deadlines.

But along with this improvement in flexibility, we’ve moved from uptime measured in years to uptime measured in hours. Both platforms have changed over time: mainframes have evolved to be more flexible without compromising on security, reliability and availability, and PCs have remained easier to use but have made dramatic improvements in security, reliability and availability, although they are still lagging behind the mainframe.

Mainframes tend to be more expensive and difficult to administer due to talent shortages, but IBM, Broadcom, BMC and others have moved aggressively to increase training. While the shortage of skilled people has eased somewhat, it’s generally still harder to find good mainframe staff than it is to find good x86 server staff.

Mainframes and banks

Mainframes exist in critical mass in three verticals: banking, healthcare, and government. But the banking sector has been the most aggressive in preserving this technology overall. Why? Because typically, banks have to maintain strong reputations and meet stringent regulatory requirements and find that mainframes are better at balancing cost and risk than most other segments.

Thus, a bank’s selection and sustained use of a mainframe can be a direct indicator of how well the bank manages risk internally. In other words, banks that have mainframes put risk mitigation before cost, while banks that don’t have mainframes can put cost before risk mitigation.

Poor risk management has been linked to the recent bankruptcies of Silicon Valley Bank and First Republic Bank, suggesting the connection between risk mitigation and technology selection to be linked at least anecdotally. While clearly neither the only nor the absolute indicator of sound risk management, mainframe usage may be one of the most easily captured indicators of a bank’s priorities of risk versus profit.

Unreasonable risk behavior is difficult to identify

I am a former internal auditor and can tell you from experience that, even within the company, identifying unreasonable risk behavior before a catastrophe is a challenge. What you are looking for are things like rapidly increasing expenses for meals and entertainment, meetings between managers and subordinates, unusual acquisitions or executive salaries and expenses that are not in line with industry norms.

But I think mainframe usage may be an even better indicator because the mainframe is a large enough capital expenditure to be relevant to a bank, and the reasons for buying and maintaining a mainframe are closely related to a high attention to risk reduction when a bank chooses to take a profit to mitigate risk.

As I write this, I’ve checked to see if the financial institution I use (which I won’t mention for personal safety reasons) uses a mainframe. It does, and I’m suddenly less concerned that it might fail, not that I’ve ever worried about recent failures before.

Wrapping up

Mainframe usage is directly tied to the priority of reliability, availability and security over absolute profitability. Given that recently failed banks have prioritized short-term profitability, I think one of the ways to determine whether your bank is likely to make high-risk decisions that you don’t know about is to find out if they use a mainframe.

Like many of you, I fear my pension funds are safe given recent bank failures. Knowing that you’re in an organization that has chosen to use a mainframe provides additional peace of mind. I’m not saying that a bank that doesn’t use a mainframe isn’t safe, just that this decision could indicate a more significant problem related to that bank’s priorities that would now be concerning given the recent bankruptcies.

Technology product of the week

LAVA Charge Check

LAVA Charge-Check to protect the Li-ion battery from overcharging.

My phone of choice is the Microsoft Surface Duo 2, which I will soon be replacing with the new Lenovo ThinkPhone. One reason is that I usually plug my phone into a fast charger at night and the battery life has gotten steadily worse over time.

So when LAVA reached out to me to try out its Charge-Check, a device designed to prevent battery degradation, I was interested, albeit skeptical. I have been the lead acid battery analyst for much of the world for several years and have found that gadgets like this are often frauds.

That said, I’ve been using Charge-Check for several weeks now and it does exactly what LAVA said it would. Initially, she charged the device to maximum and then shut down. I was concerned that you would often end up with a healthy but dead battery, but that was because I hadn’t read the instructions (surely my boyfriend’s genes kick in).

If you’re using the button, which sets timeouts between charges, I suggest pressing the button twice and holding it after the last press for 10 seconds for a two-hour cool down time. However, if the display is on while charging, the hour interval is likely to ensure you don’t have a dead battery. Your phone will almost always be near capacity, and the battery should last indefinitely.

Given that new phones can cost more than a thousand dollars, and battery replacements can cost $100 or more depending on the phone, this $29.99 little device is a decent investment.

I should add that LAVA, the parent company, is Ukrainian and Canadian owned, and I like to do everything I can to help Ukraine, which made the decision to select LAVA Charge-Check as Product of the Week rather easy. It also keeps me from burning out phones so fast because I hate switching phones.

The views expressed in this article are those of the author and do not necessarily reflect the views of ECT News Network.

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