You are here: Home - Saving & Banking - News -

FSA demands inquiry over RBS IT failures

Written by:
Financial Services Authority (FSA) chairman Lord Turner has promised an independent inquiry into an IT glitch that affected millions of Royal Bank of Scotland (RBS), NatWest and Ulster Bank customers in June.

The bank was forced to set aside £125m in compensation for the error, with the regulator refusing to rule out further regulatory action.

In correspondence between Turner (pictured), RBS chief executive Stephen Hester and Treasury Select Committee (TSC) chairman Andrew Tyrie, Turner said an internal review promised by Hester was unsatisfactory.

“While the firm has put in place its own independent review, we have informed RBS that we require a full separate review to be undertaken… to establish what went wrong and why,” he said.

“On the receipt of the independent review, we will consider whether further regulatory action is required.”

Tyrie said the failure had even threatened to “infect” the rest of the banking system.

“It was not just RBS customers who suffered,” he said. “For some, the consequences were very severe.”

“The ability of retail and corporate customers to obtain access to funds and other payment facilities is crucial. This episode, and the initial confusion surrounding it, did little for public confidence in our banks.”

In the letters Hester admitted RBS’s service had fallen below customers’ expectations.

“My top priority since joining has been to change RBS – physically and culturally,” he said. “We have yet to achieve a satisfactory level of system resilience as part of that, albeit this was a unique incident.”

However, Tyrie said Hester had “done the right thing” by attempting to rectify the situation and compensate customers.

“Mr Hester took swift action to remedy the failure; he also took full responsibility on behalf of RBS.

“Those affected now need clear and straightforward information to enable them to seek redress.

“The [TSC] will doubtless want to look closely at RBS’ final report when it is published to ensure that any systemic weaknesses and governance issues are adequately addressed, both by the bank and by the FSA.

“Every bank should be checking its IT systems. We need to have confidence that such a failure cannot happen again.”

In response to Tyrie’s question on whether the FSA documented IT failures, and whether it had sufficient powers to prevent a similar situation reoccurring, Turner admitted the regulator relied on banks to self-report on significant issues.

Firms are required to report “significant or material failures” under principle 11 of the FSA handbook, Turner said, though the watchdog could also be alerted to failures by customers.

Tag Box




Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
Under-28s don’t plan finances

Brits claim that, on average, they are oblivious to planning their finances for the longer-term until they turn 28 years...