TSB ‘ig­nored ad­vice’ and rushed up­grade

The Sunday Telegraph - Money & Business - - Front page - By Iain Withers

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.

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