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UPDATE 3-RBS vows no repeat of system meltdown after $88 million fine
November 20, 2014 / 7:23 AM / 3 years ago

UPDATE 3-RBS vows no repeat of system meltdown after $88 million fine

* RBS fined 42 mln stg by FCA; PRA hands out 14 mln stg fine

* PRA’s Bailey says RBS must “fix the underlying problems”

* Bank invests extra 750 mln stg to prevent recurrence

* RBS executive says there will be no repeat of incident (Adds comments from RBS executive)

By Matt Scuffham

LONDON, Nov 20 (Reuters) - Royal Bank of Scotland vowed there would be no repeat of a system crash two years ago that left millions of customers unable to make or receive payments, after it was fined 56 million pounds ($88 million) by British regulators on Thursday.

The 2012 outage, caused by a botched software upgrade, affected 6.5 million customers of RBS, NatWest and Ulster Bank in Britain for several weeks and raised questions about the resilience of the group’s technology.

Some industry sources say RBS’s systems are outdated and made up of a complex patchwork of systems after dozens of acquisitions.

To prevent a recurrence of the problems, RBS has said it will invest an extra 750 million pounds by the end of 2015 to enhance the security and resilience of its IT systems.

Chief administration officer Simon McNamara said that more than 500 million pounds of that investment had already been invested to improve the bank’s systems.

“I can pretty much guarantee that that incident will not happen again because of the actions we’ve taken,” he said.

The penalties imposed on Thursday comprised a 42 million pound fine from the Financial Conduct Authority (FCA) and a 14 million pound fine from the Prudential Regulation Authority (PRA).

The two regulators conducted a joint investigation into the matter, concluding that RBS’s systems and controls had been inadequate.

PRA Chief Executive Andrew Bailey said the incident “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,” he said.

The group suffered a further technology outage in December last year, which left more than 1 million customers unable to withdraw cash or pay for goods.

Following that episode, Chief Executive Ross McEwan admitted RBS - which is 80 percent-owned by the British government - had neglected its technology for decades.

The 2012 incident cost RBS 175 million pounds in compensation for customers and extra payments to staff after the bank opened branches for longer in response.

The bank said 6 million pounds was taken off its wage bill following the incident as a result of some staff forfeiting pay and bonuses, including bonuses waived by former RBS Chief Executive Stephen Hester and Ulster Bank CEO Jim Brown.

1 US dollar = 0.6391 British pound Editing by Steve Slater and Pravin Char

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