TSB ‘ignored advice’ and rushed upgrade
TSB is facing mounting criticism for rushing through a full-scale IT system switch of 1.3 billion customer records in one go, leading to a meltdown and more than a week of outages to vital banking systems.
The challenger bank opted for a high risk “big bang” approach to the complex migration from the system it rented from Lloyds to one run by Spanish parent Sabadell. “This flew in the face of best practice. When Lloyds and HBOS merged, they did multiple migration events – mortgages, cards, personal loans were split up – and moved batches of customers,” a City source said. “The more you split things up the easier it becomes to reduce the risk.”
Around a million TSB customers were still unable to access online and mobile banking services on Friday.
Scrutiny is likely to turn to the role of City watchdogs the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) in overseeing the bungled TSB system switch.
TSB chief Paul Pester has said they were involved in plans “from day one”.
An FCA spokesman said: “It is not our role to give our approval for this type of project”. It said it would make an assessment “focusing on the impact on customers”. Its sanctions include unlimited fines. The PRA declined to comment.
It scarcely sounds believable in this day and age but, as things stand, as many as a million TSB customers are still locked out of their bank accounts this weekend, and the firm’s calamitous IT meltdown is about to enter its second week. It is no exaggeration to say that this has had a serious impact on many customers’ lives. Hundreds have gone on Facebook and Twitter to share their stories. Others have spoken directly to this newspaper about the problems they have encountered as a result of TSB’S giant cock-up.
One said her entire wedding fund had gone missing. A second was down to his last £20 and had to pawn off his laptop, while another kept having her cards declined all week.
The crisis has all the ingredients needed for it to go down as one of the biggest corporate gaffes in recent memory: a big household name; millions of outraged customers; widespread, damaging costs; and a blundering chief executive who seems to make the situation worse every time he speaks out with his insensitive remarks.
Yet the most regrettable aspect of it all is that it could probably have been avoided. As we report this weekend, TSB was advised not to attempt a giant upgrade of its IT systems in one go because of the risks involved.
It is widely known that large tech migrations often blow up. In 2016, Vodafone tried to ditch an array of old-fashioned IT systems in favour of a modern, all-in-one customer service provider at a stroke. The results were disastrous. It has taken two years for the tidal wave of complaints that followed to ebb away.
It is common practice to move slowly and transfer the technology bit by bit over a period of days and weeks with back-up systems still running. That would have been the responsible course of action, but TSB chose to ignore all the evidence and take a gamble. It has backfired spectacularly.
Companies screw up all the time. Indeed, IT meltdowns are alarmingly common in banking – RBS has suffered several. But TSB’S issue stands out for two reasons: it was the result of reckless decision making at the highest level, and has been handled appallingly by a chief executive clearly out of his depth. Calls are growing for Paul Pester to forgo his bonus and the bank has promised to waive millions in customer fees, but even that may not be enough to save his job after this fiasco.
‘TSB was advised not to attempt a giant upgrade of its IT systems in one go’
A blue-chip few would miss
Flemming Ornskov, boss of Shire, deserves credit for the way he has handled takeover negotiations with Japan’s Takeda.
The wily Dane has teased them into a total of five bids, the latest a juicy 60pc premium to where the drug maker’s share price was when the Japanese first came knocking.
Despite fears that Brexit would dent Britain’s attractiveness, FTSE 100 companies are disappearing at the fastest rate for a decade.
The prospect of a UK corporate being gobbled up usually generates a stir. Witness the vigour with which Paul Polman defended Unilever from the clutches of 3G and Warren Buffett, the criticism that followed the quick sale of Arm to Softbank, and the stink that GKN’S sale to Melrose kicked up.
The same, however, cannot be said of Shire. As one senior City figure remarked to me last week: “I haven’t heard a single protest so far.” On the face of it, it would be a great loss if the drugs giant was subsumed into a foreign entity. Takeda is a highly successful corporation but it’s Shire’s access to the US market that it covets most.
Shire may not be a household name but the company emerged a decade ago as one of the stars of Britain’s pharmaceuticals industry alongside Glaxosmithkline and Astrazeneca.
Formed by a quartet of British entrepreneurs in 1986, it went from start-up to stalwart of the blue-chip index with startling speed. It now ranks above RBS, BT, Sky and Tesco as the UK’S 19th biggest company, with a market value of £36bn. Yet Shire has never felt very British. The company’s headquarters are in Dublin for tax purposes and although it has several thousand employees in the UK, its American operations are much larger.
Meanwhile, the City’s love affair with Shire has dwindled. Performance has been poor since it took over rare disease specialist Baxalta two years ago, and some shareholders haven’t forgiven Ornskov for pushing ahead with the debt-fuelled deal. A cash sweetener from Takeda, and Shire will disappear without much of a whimper.