FSA demands inquiry over RBS IT failures
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.