Royal Bank of Scotland has been fined £56m for a meltdown in its consumer systems that locked 6.5 million customers out of their bank accounts for days on end in June 2012.
The 81% taxpayer owned bank issued an apology for the problems and said it had docked the bonuses of staff responsible for collapse of the IT systems which affected customers at RBS, NatWest and Ulster Bank.
The regulator pointed out that the 6.5 million people affected was 10% of the population. Taking a new hit to its reputation just eight days after being fined £400m for allowing foreign exchange markets to be rigged, the regulators said RBS had suffered from failures at many levels across the group and failed to keep its computer systems up to date, despite spending £1bn a year on technology.
The fines were levied by the City regulator, the Financial Conduct Authority, which imposed a £42m fine and by the Bank of England which used new powers, for the first time, to impose a £14m fine from its regulatory arm, the Prudential Regulation Authority.
The PRA said dispruption to the majority of RBS and Natwest systems lasted from 19 June until 26 June 2012, and Ulster Bank systems until 10 July 2012. Disruptions to other systems continued into July 2012. The watchdog was concerned that “the IT incident had the potential to have an adverse effect on the safety and soundness” of the bank.
Sir Philip Hampton, the outgoing chairman of RBS, said: “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.
The FCA said it had written to the chairmen of major retail banks in 2012 to ask what steps they were taking to ensure they did not suffer similar problems. Along with the PRA it recently embarked on another exercise to seek future reassurance about the resilience of their IT systems.
Tracey McDermott, director of enforcement and financial crime at the FCA said fines should focus on meeting the needs of customers.
“Modern banking depends on effective, reliable and resilient IT systems. The Banks’ failures meant millions of customers were unable to carry out the banking transactions which keep businesses and people’s everyday lives moving,” she said.
“The problems arose due to failures at many levels within the RBS Group to identify and manage the risks which can flow from disruptive IT incidents and the result was that RBS customers were left exposed to these risks,” she added.
RBS had already set aside £175m to make payments to customers affected by the computer problems and said after “a full accountability review” was carried out covering 64 individuals.
Of those, 16 - including the former chief executive Stephen Hester - either waived their bonuses or had them cut as a result, leading to a £6m cut in pay.
As the PRA levied its first fine, Andrew Bailey, head of the regulator and deputy governor of the Bank of England, said: “The severe disruption experienced by RBS, Natwest and Ulster Bank in June and July 2012 revealed a very poor legacy of IT 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 safety and soundness of the banks.”
theguardian.com
The 81% taxpayer owned bank issued an apology for the problems and said it had docked the bonuses of staff responsible for collapse of the IT systems which affected customers at RBS, NatWest and Ulster Bank.
The regulator pointed out that the 6.5 million people affected was 10% of the population. Taking a new hit to its reputation just eight days after being fined £400m for allowing foreign exchange markets to be rigged, the regulators said RBS had suffered from failures at many levels across the group and failed to keep its computer systems up to date, despite spending £1bn a year on technology.
The fines were levied by the City regulator, the Financial Conduct Authority, which imposed a £42m fine and by the Bank of England which used new powers, for the first time, to impose a £14m fine from its regulatory arm, the Prudential Regulation Authority.
The PRA said dispruption to the majority of RBS and Natwest systems lasted from 19 June until 26 June 2012, and Ulster Bank systems until 10 July 2012. Disruptions to other systems continued into July 2012. The watchdog was concerned that “the IT incident had the potential to have an adverse effect on the safety and soundness” of the bank.
Sir Philip Hampton, the outgoing chairman of RBS, said: “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.
The FCA said it had written to the chairmen of major retail banks in 2012 to ask what steps they were taking to ensure they did not suffer similar problems. Along with the PRA it recently embarked on another exercise to seek future reassurance about the resilience of their IT systems.
Tracey McDermott, director of enforcement and financial crime at the FCA said fines should focus on meeting the needs of customers.
“Modern banking depends on effective, reliable and resilient IT systems. The Banks’ failures meant millions of customers were unable to carry out the banking transactions which keep businesses and people’s everyday lives moving,” she said.
“The problems arose due to failures at many levels within the RBS Group to identify and manage the risks which can flow from disruptive IT incidents and the result was that RBS customers were left exposed to these risks,” she added.
RBS had already set aside £175m to make payments to customers affected by the computer problems and said after “a full accountability review” was carried out covering 64 individuals.
Of those, 16 - including the former chief executive Stephen Hester - either waived their bonuses or had them cut as a result, leading to a £6m cut in pay.
As the PRA levied its first fine, Andrew Bailey, head of the regulator and deputy governor of the Bank of England, said: “The severe disruption experienced by RBS, Natwest and Ulster Bank in June and July 2012 revealed a very poor legacy of IT 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 safety and soundness of the banks.”
theguardian.com
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