IT cri­sis saved branches, says TSB chair­man

TSB’S chair­man is hope­ful that the bank can move on from its night­mare year.

The Sunday Telegraph - Money & Business - - Front page - By Lucy Burton

UN­DER-PRES­SURE TSB has rowed back on plans to cut its high street bank branches fol­low­ing an IT melt­down that left it on its knees. Chair­man Richard Med­dings told

The Sun­day Tele­graph that plans to cut some of the bank’s 550 branches have now been re­vised as the phys­i­cal stores “made a real dif­fer­ence” to cus­tomers dur­ing its IT cri­sis, the UK bank­ing sec­tor’s worst crash in re­cent mem­ory. “Our plans [for cut­ting branches] are dif­fer­ent to­day to what they would have been if we had this meet­ing when I joined the board last Oc­to­ber,” Mr Med­dings said. “[But] we didn’t get given the best branch net­work when we left Lloyds [in 2014] so there will be some that will be closed, some will open, we’ll in­vest in oth­ers.”

TSB de­clined to com­ment on how many branches have been saved as a di­rect re­sult of the botched IT up­grade. How­ever Mr Med­dings in­sisted that it will have more than 500 branches “for some time to come”. He said he hoped the net­work will also help land TSB a large slice of the £775m up for grabs from RBS. The fund is aimed at boost­ing com­pe­ti­tion in busi­ness bank­ing.

The UK has lost over half of its bank branches since 1989. TSB is at­tempt­ing to move on from its night­mare year, hir­ing CYBG vet­eran Deb­bie Cros­bie to be­come chief ex­ec­u­tive in 2019.

TSB chair­man Richard Med­dings has had his fair share of luck. His friend Robin Bu­den­berg has twice had to watch as the TSB chair­man hit a hole-in-one while play­ing golf against him – in­clud­ing one on his stag do, which was wit­nessed by 11 of his clos­est friends. “How lucky is that?” jokes the vet­eran City banker, who was best man at Med­dings’ wed­ding. “He thinks he’s good at golf but ev­ery­one he’s played against knows he’s just lucky.”

At first glance, it doesn’t ap­pear that Med­dings has car­ried that luck from the golf course into the board­room. The 60-year-old was the fi­nance chief at Stan­dard Char­tered dur­ing the fi­nan­cial cri­sis, leav­ing af­ter a “chal­leng­ing year” and in the wake of a £415m fine for sanc­tion breaches from US reg­u­la­tors. He has been au­dit com­mit­tee chair­man at Deutsche Bank through­out its loss-mak­ing years, tak­ing up the post as the Ger­man lender pressed go on a five-year over­haul. And he be­came the chair­man of TSB just months be­fore it was hit with an IT cri­sis so bad that MPS re­named it the “Truly Sham­bolic Bank”.

One se­nior TSB insider ar­gues that the “rough and tum­ble” of Med­dings’ ca­reer pre­pared him for fall­out from the chal­lenger bank’s dis­as­trous IT up­grade. Yet Med­dings’ seems vis­i­bly of­fended when asked if he feels as though he has been in the wrong place at the wrong time, re­peat­edly clar­i­fy­ing his sense of good for­tune.

“My mother al­ways used to say how on earth did you be­come a fi­nance di­rec­tor of a bank just be­fore the fi­nan­cial cri­sis,” he says of Stan­dard Char­tered, his favourite job to date. “I think I’ve been very lucky ac­tu­ally – I’ve lived through the changes in bank­ing, I’ve been do­ing it since 1984. I’m not quite sure why [any­one would think] I’ve been un­lucky.”

But in de­scrib­ing the past 12 months – dur­ing which TSB suf­fered a mas­sive IT melt­down that re­sulted in po­lit­i­cal scru­tiny, pub­lic ridicule and the chief ex­ec­u­tive Paul Pester be­ing forced out – Med­dings uses metaphors de­rived from con­tact sports rather than golf.

On strat­egy he cites boxer Mike Tyson – “ev­ery­one has a plan un­til they get punched in the mouth”; on the bank’s re­sponse he turns to leg­endary Amer­i­can foot­ball coach Vince Lom­bardi – “it’s not whether you get knocked down, it’s whether you get up”. And he in­sists that the TSB brand is “bruised rather than frac­tured”.

The bank has started to pull it­self off the can­vas. The re­cent ap­point­ment of CYBG vet­eran Deb­bie Cros­bie as its next boss is viewed as a ma­jor coup. But it will be a while be­fore the hits of the last year stop ring­ing in its ears. The lender’s IT crash was the UK bank­ing sec­tor’s big­gest tech­nol­ogy fi­asco in years, leav­ing al­most 2m peo­ple with­out ac­cess to their bank ac­count, while 1,300 lost money through fraud at­tacks and 370 for­mer cus­tomers were wrongly told that they had died. Be­tween April and June, the bank lost around 500 cus­tomers a day. Some of those who stayed re­main an­gry.

“There’s been no out­reach to me as a cus­tomer say­ing: ‘Oh, well since the en­counter your ac­count has been dor­mant how do we get you back again,” says Jonathan Sil­ver­man, a cus­tomer who runs a con­sul­tancy for law firms. “It’s silent, it’s al­most like they’re still too em­bar­rassed.

“I’ve left my ac­count dor­mant to give them a chance to do some­thing proac­tive – I will open an ac­count with some­one else if they don’t get their act to­gether in the next cou­ple of weeks. I’m talking to law firms ev­ery day about their bank­ing and I can’t pos­si­bly put TSB be­fore any of them at the mo­ment.”

It is not sur­pris­ing that peo­ple are still an­noyed. MPS crit­i­cised TSB’S han­dling of the melt­down back in June, ac­cus­ing its bosses of be­ing slow to ad­mit to the ex­tent of the prob­lems. Med­dings ar­gues that the team was sim­ply re­act­ing to the in­for­ma­tion they re­ceived from their Span­ish owner at the time, and in­sists there was no de­lib­er­ate at­tempt to gloss over the sit­u­a­tion. The ini­tial mes­sage was that sys­tems would be up and run­ning within two hours. The prob­lems ac­tu­ally con­tin­ued for weeks.

“There’s that say­ing: ‘Don’t shout fire in a crowded the­atre,’” he says. “Look­ing back [you think] you should have been much more force­ful in the neg­a­tive­ness of the mes­sag­ing, but of course it’s a ret­ro­spec­tive judg­ment. Ev­ery­one was try­ing to do their ab­so­lute best, they re­ally were, in very dif­fi­cult cir­cum­stances.”

Does he think Pester – once de­scribed as “the luck­i­est man in bank­ing” for nar­rowly miss­ing out on the top job at the Co-op­er­a­tive Bank be­fore a £1.5bn black hole was un­cov­ered – should have left ear­lier than he did? He stood down in Septem­ber, six months af­ter the IT is­sues first sur­faced.

“It’s about un­der­stand­ing how im­por­tant he was in the psy­che of TSB, and in the heat of all that mi­gra­tion cri­sis to es­sen­tially pull out the CEO I think would have posed a very sig­nif­i­cant op­er­a­tional risk to the group,” says Med­dings. “He’s held in huge re­spect and af­fec­tion around the group. An ear­lier time sim­ply would have been wrong.”

Med­dings doesn’t pin­point an ex­act mo­ment when he re­alised the bank was in the grip of a ma­jor PR dis­as­ter. He said it was stress­ful, but not nec­es­sar­ily more stress­ful than the fi­nan­cial cri­sis. Friends of his say his answer would have been dif­fer­ent a decade ago – the re­spected banker’s long ex­pe­ri­ence of stress­ful sit­u­a­tions helps him to stay calm in a cri­sis.

“He was con­cerned, ob­vi­ously, and think­ing about it, ob­vi­ously, but not stressed, def­i­nitely not stressed,” says one per­son close to him. “With­out doubt it would have been dif­fer­ent 10 years ago. He’s been able to take this in a very mea­sured way.”

Med­dings says he had four pri­or­i­ties when he took over as ex­ec­u­tive chair­man fol­low­ing Pester’s de­par­ture: en­sure the bank’s IT sys­tems were more sta­ble, im­prove the way TSB re­solved cus­tomer com­plaints, find a new chief ex­ec­u­tive and put in a bid for the RBS “al­ter­na­tive reme­dies pack­age”, the fund set up as a con­di­tion of the state sup­port pro­vided to RBS fol­low­ing the fi­nan­cial cri­sis. He be­lieves that he has ticked the first three boxes, al­beit with fur­ther work to do on ad­dress­ing cus­tomer com­plaints, and a bid will go in later this month for the RBS funds.

He is con­vinced that TSB can make a strong case for the money and hopes that MPS judg­ing the bids will be able to look past the IT melt­down. TSB branches are well spread around the coun­try (un­like Metro, which is pre­dom­i­nately based in the South East, and CYBG, which is fo­cused on the M6 cor­ri­dor) and it has room to grow. TSB op­er­ates 6pc of the UK’S bank branches but has only a 2pc share of the busi­ness bank­ing mar­ket. San­tander, on the other hand, op­er­ates roughly 10pc of coun­try’s branches and 10pc of busi­ness bank­ing and there­fore, TSB ar­gues, would find it harder to grow.

It is in­ter­est­ing that TSB high­lights the im­por­tance of its 550 branches, in­her­ited when the bank was spun out of Lloyds, in win­ning SME busi­ness. This runs counter to the pre­vail­ing mood in the UK bank­ing in­dus­try at a time when most of its ri­vals can’t shut their branches quickly enough. In fact it seems the bank’s night­mare year has shifted Med­dings’ think­ing – he in­sists that TSB will op­er­ate more than 500 branches for some time to come.

“Our is­sue was pri­mar­ily an ac­cess is­sue, so if you lose your on­line ca­pa­bil­ity, hav­ing the phys­i­cal branch net­work made a real dif­fer­ence,” he says. “We didn’t get given the best branch net­work when we left Lloyds so there will be some that will be closed, some will open, we’ll in­vest in oth­ers. [But] our plans [for cut­ting branches] are dif­fer­ent to­day to what they would have been if we had this meet­ing when I joined the board last Oc­to­ber.”

Look­ing ahead, Med­dings in­sists the bank has suc­ceeded in get­ting back up af­ter its prover­bial punch in the mouth. “We caused a lot of dis­tress and in­con­ve­nience, and our obli­ga­tion is to fix it – which we have largely done.”

‘My mother al­ways used to say how on earth did you be­come a fi­nance di­rec­tor of a bank just be­fore the cri­sis’

Richard Med­dings, TSB chair­man, has had a chal­leng­ing year as the bank was caught up in a dis­as­trous IT up­grade, which claimed the scalp of Paul Pester, the chief ex­ec­u­tive

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.