And the danger is that the pressures put on it by the explosion in internet banking, mobile banking etc may only exacerbate things. This is well known within the industry.
Anthony Browne, chief executive of the British Bankers Association, said this week: “A lot of banks have creaking IT systems. They are incredibly complicated… that’s why banks are spending £3 billion a year upgrading their systems.”
Jayne-Anne Gadhia, the chief executive of Virgin Money, also told me this week that a major challenge for the big banks was “complicated IT systems that are tangled and old”.
Technology issues for the banking sector are not something that has come out of the blue. Back in the summer of 2010 Santander UK announced it was negotiating with RBS to buy 300 branches that the bank had to offload at the behest of the European Union in return for the Scottish bank’s taxpayer bailout. But when Project Rainbow, as it was called, broke down in the autumn of 2012, it was an open secret that one of the Spanish owned Santander’s main concerns was the state of the RBS IT platform that would have to be cut out to support those branches when transferred to the new owner.
Breakdowns of the system – or outages – are relatively rare, but still deeply inconvenient and unnerving for customers when they do happen.
The technology challenges can be heightened when there are banking mergers. There are significant operational issues in merging two banks’ IT platforms.
But as considerable IT savings from merging two systems to serve a bigger merged bank are often a major part of the “synergies” justifying the acquisition logic it is not a problem that can easily be avoided.
Banking has been transformed by the sociological change of more and more people using electronic transactions rather than branch-led ones to deal with the finance in their lives.
It has conferred many benefits, not least convenience. But the sheer scale of digital banking now means systems supporting it should really be at the cutting edge of reliability and sophistication.
Even with the billions of pounds the industry has thrown at it, it doesn’t seem we are quite there yet.
STANDARD Life’s asset management arm (SLI) is no slouch on corporate governance issues, and so it is ironic that the parent group has appointed a new chief executive to take over from the departing David Nish without interviewing other internal or external candidates.
This is not to denigrate the appointment of Keith Skeoch, the head of SLI, to the top job. He has led a highly successful division with distinction for more than a decade.
It also makes sense to have a strong fund management influence at the top after Nish has successfully repositioned the business over the past six years as an asset manager, and more fee-driven, and away from straight insurance.
But interviewing other candidates does tend to add lustre to a talented executive’s eventual appointment, showing he has seen off the opposition comfortably.