National Australia Bank has launched a review of its IT arrangements following the revelation that a key contractor has admitted falsifying its accounts and overstating profits.
Two other banks, ANZ Banking Group and Suncorp-Metway, say they are monitoring the situation following news of the scandal involving India's Satyam Computer Services.
Satyam's chairman, B Ramalinga Raju, has confessed to falsifying the company's accounts by inflating earnings and assets by $US1 billion.
On Thursday, Satyam's interim chief executive, Ram Mynampati, said he was unsure whether the company had enough cash to continue operating this month.
Shares in the Mumbai and New York listed company plunged by 78 per cent overnight.
Satyam employs 1,800 people in Australia. Its local unit reported flat growth for the September 2008 quarter, competing with EDS, IBM, Accenture and CSC for large IT project engagements.
News of the $1.84 billion scandal comes as most Australian banks are moving to upgrade their core platforms.
But NAB says Satyam is continuing to meet its contractual obligations in working on legacy systems for the bank's multi-billion dollar IT platform upgrade.
NAB spokeswoman Kerrina Lawrence told AAP that "NAB is closely reviewing the Satyam matter".
"The systems and technology are performing and Satyam is meeting its contractual obligations," she said.
"Contingency plans are in place to ensure continuity of service."
ANZ and Suncorp Metway are in contract with Satyam for systems and software services.
ANZ says it has a "small" relationship with the IT services provider through contracts valued at under $10 million.
"The issues at Satyam will not have a material effect on our IT operations," ANZ spokeswoman Katherine Rellos said.
There had been no disruption to services.
Suncorp Metway spokeswoman Michelle Barry said the bank assurer had around seven contracts with Satyam for current projects commencing last year.
Satyam was continuing to meet its contractual obligations, she said.
NAB's larger contract, which is believed to be minor and immaterial to earnings, has three years to run after Satyam was appointed last August to address legacy system issues on the bank-wide move to a new generation IT platform.
NAB is set to spend between $800 million and $900 million a year over five years on the upgrade, which will see core banking systems replaced.
New chief executive Cameron Clyne described the work as a once-in-a-generation upgrade, which followed preparatory work lifting the bank's IT expenses to $963 million for fiscal 2008.
Oracle is leading the upgrade, with several other suppliers, including Satyam, Ms Lawrence said.
Commonwealth Bank, Westpac, St George Bank, and Bendigo and Adelaide Bank say they have no relationship with Satyam.
NAB, ANZ and Suncorp Metway join QBE Insurance, Telstra, Optus, Qantas, and Wesfarmers' Coles as affected by the fraud.
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