Tyrie feared ‘general infection’ from RBS computer meltdown

By MARTIN FLANAGAN
Published on 04/09/2012 00:00

The chairman of the House of Commons Treasury committee yesterday claimed the massive summer breakdown of IT systems at Royal Bank of Scotland and key subsidiaries “threatened to infect the rest of the banking system”.

Andrew Tyrie MP, publishing letters written at the height of the crisis between him, RBS boss Stephen Hester and Financial Services Authority chairman Lord Turner, said the episode “did little for public confidence in our banks”.

It came amid separate reports that the RBoS Action Group is “within weeks” of launching a £3.3 billion lawsuit against the bank and its former chief executive Fred Goodwin about being allegedly misled on the financial health of RBS at the time of its £12bn rescue rights issue in 2008. Later that year RBS plunged into part-state ownership.

That in turn comes as the bank braces itself for heavy fines over its role in manipulating the London Interbank Offered Rate.

Tyrie’s letters to Hester and Turner show the level of political concern earlier this summer that the RBS computer breakdown, which also affected its NatWest and Ulster Bank subsidiaries, would also hit the wider UK banking payments system.

Hester’s response is contrite, saying RBS staff were working day and night to resolve the problems, promising an independent investigation, and stressing he is “deeply sorry for the disruption experienced by our customers during the systems delays”.

The RBS boss tells Tyrie that the “root cause” of the problem, which affected millions of bank customers, was “a routine software upgrade managed and operated by our team in Edinburgh, which caused the automated processing software to malfunction”. He also outlines proposals for financial redress to those affected.

Tyrie said yesterday: “It was not just RBS customers who suffered. The problems, and the confusion they caused, threatened to infect the rest of the banking system. For some, the consequences were very severe.

“The ability of customers to obtain access to funds and other payment facilities is crucial.”