RBS landed with £56m fine over IT meltdown

Prolonged IT problems that affected millions of customers of NatWest, Ulster Bank, and RBS have landed the bank with a massive penalty.
Written by Jo Best, Contributor

RBS Group has been hit with over £56m in fines following significant IT failures two years ago.

The problems, which affected RBS, NatWest, and Ulster Bank during June 2012, left 6.5 million customers unable to get accurate balances for their accounts and use some banking services online and at ATMs. In some cases, customers failed to make their mortgage payments, pay staff on time, or were left abroad with no access to cash as a result of the glitches.

The problems persisted for several weeks, and were caused by issues with a software upgrade in the bank's overnight processing system.

On Wednesday two regulators fined the bank over the issue. The Financial Conduct Authority said RBS had failed "to put in place adequate systems and controls to identify and manage their exposure to IT risks", and fined the bank £42m.

The Prudential Regulation Authority also fined the bank £14m. "Properly functioning IT risk management systems and controls are an integral part of a firm's safety and soundness. The PRA considers that the IT incident could have threatened the safety and soundness of the banks and could have, in extremis, had adverse effects on the stability of the financial system in that it interfered with the provision of the banks' core banking functions, impacted third parties and risked disrupting the clearing system," it said.

In both cases, RBS Group agreed to settle at an early stage, thereby entitling it to a 30 percent discount on the fine. Had it not done so, the fines would have totalled over £90m. Ulster Bank was separately fined €3.5m by the Central Bank of Ireland earlier this month.

RBS has also paid out over £70m in compensation to customers and others that lost out because of the IT problems.

Philip Hampton, chairman of RBS, said the bank has spent hundreds of millions of pounds on improving its IT systems since the outage. "Our IT failure in the summer of 2012 revealed unacceptable weaknesses in our systems and caused significant stress for many of our customers. As I did back then, I again want to apologise to all customers in the UK and Ireland that we let down two and a half years ago," he added.

According to RBS, upgrades to the IT systems following the 2012 issues have cost the bank £750m.

Among the improvements the bank said it had made were upgrades to mobile banking infrastructure and international payments systems; improving its mirroring capabilities; and splitting out the batch transformation processing for each individual bank, so that an outage on one would not affect the other, as happened during the June disruption. Previously, the bank had its four brands — NatWest, RBS, Ulster Bank Northern Ireland, and Ulster Bank Republic of Ireland — all on two schedulers. Now each has a separate scheduler, speeding up overnight processing times.

Further improvements are planned, including more mirroring upgrades during the remainder of the year to enable customers to access mini statements and other facilities in the event of an outage; reducing the number of payment systems in use at the bank over the coming years; and moving the company's mobile platform from being externally hosted to run in-house.

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