Royal Bank, af­fil­i­ates fined £56m for dis­rup­tions caused by IT glitches

The Star Early Edition - - BUSINESS REPORT - Matt Scuffham

ROYAL Bank of Scot­land (RBS) has been fined £56 mil­lion (R967m) by UK’s fi­nan­cial reg­u­la­tors for a sys­tem crash in 2012 that left mil­lions of cus­tomers un­able to make or re­ceive pay­ments.

The 2012 ou­tage, caused by a botched soft­ware up­grade, af­fected 6.5 mil­lion cus­tomers of RBS, NatWest and Ul­ster Bank in Bri­tain for sev­eral weeks and raised ques­tions about the re­silience of the group’s tech­nol­ogy.

Some in­dus­try sources say RBS’s sys­tems are out­dated and con­sist of a com­plex patch­work of sys­tems after dozens of ac­qui­si­tions.

The penal­ties im­posed yes­ter­day com­prised a £42m fine from the Fi­nan­cial Con­duct Au­thor­ity (FCA) and a £14m fine from the Pru­den­tial Reg­u­la­tion Au­thor­ity (PRA). The two reg­u­la­tors con­ducted a joint in­ves­ti­ga­tion into the mat­ter and the fine from the PRA is the first it has im­posed since its cre­ation in April 2013.

They con­cluded RBS’s sys­tems and con­trols had been in­ad­e­quate. PRA chief ex­ec­u­tive An­drew Bai­ley said the in­ci­dent “re­vealed a very poor legacy of IT [in­for­ma­tion tech­nol­ogy] re­silience and in­ad­e­quate man­age­ment of IT risks”.

“It is cru­cial that RBS, NatWest and Ul­ster Bank fix the un­der­ly­ing prob­lems that have been iden­ti­fied to avoid threat­en­ing the sound­ness of the banks.”

To pre­vent a re­cur­rence, RBS has said it would invest an ex­tra £750m by the end of 2015 to en­hance the se­cu­rity and re­silience of its IT sys­tems. Chair­man Philip Hamp­ton said: “I am con­fi­dent that the progress we have made... has made RBS bet­ter able to pro­vide the ser­vices our cus­tomers ex­pect.”

The group suf­fered a fur­ther tech­nol­ogy ou­tage in De­cem­ber last year, which left more than 1 mil­lion cus­tomers un­able to with­draw cash or pay for goods on one of the busiest shop­ping days of the year. Fol­low­ing that episode, chief ex­ec­u­tive Ross McEwan ad­mit­ted RBS – which is 80 per­cent-owned by the Bri­tish gov­ern­ment – had ne­glected its tech­nol­ogy for decades.

But the FCA con­cluded that the 2012 in­ci­dent was not the re­sult of the bank’s fail­ure to invest suf­fi­ciently in its IT struc­ture. It noted that RBS spends over £1 bil­lion an­nu­ally to main­tain its IT in­fra­struc­ture. The in­ci­dent had al­ready cost the bank £175m in com­pen­sa­tion for cus­tomers and ex­tra pay­ments to staff after the bank opened branches for longer in re­sponse.

The bank said £6m was taken off its wage bill fol­low­ing the in­ci­dent as a re­sult of some staff for­feit­ing pay and bonuses, in­clud­ing bonuses waived by for­mer RBS chief ex­ec­u­tive Stephen Hester and Ul­ster Bank chief ex­ec­u­tive Jim Brown. – Reuters

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