NTFS Permissions - SYSTEM

Most Windows services are running under the SYSTEM account. Windows Search Indexer, for example, runs under Local System account. If LocalSystem account cannot access your files, they will not be indexed / found via Windows Search.

There could be other side-effects, mostly related to the fact that many services (including third-party ones) are built with the assumption that user files are accessible to the system account.

So, in theory you can remove these permissions, but in practice you need a really good reason to do so.

If the directory gives access to Administrators, then it is not necessary to give access to SYSTEM. Any access token including SYSTEM will also have Administrators.