Royal Bank’s top brass to apologise for new IT snag

Last week's IT malfunction resulted in 600,000 payments and direct debits failing to go through. Picture: Lisa Ferguson
Last week's IT malfunction resulted in 600,000 payments and direct debits failing to go through. Picture: Lisa Ferguson
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ROYAL Bank of Scotland’s two big guns will apologise this week to investors for the ­lender’s embarrassing software breakdown that hit hundreds of thousands of payments and sparked widespread condemnation.

The AGM apology by chief executive Ross McEwan and chairman Sir Philip Hampton is unlikely to defuse shareholders’ demand for answers as the latest technology debacle comes after the bank was fined £56 million by regulators last November for a massive computer failure in 2012.

That saw more than six million customers at its NatWest and Ulster Bank subsidiaries unable to make payments for up to three weeks. Last week’s IT malfunction resulted in 600,000 payments and direct debits failing to go through, with the problem coming to light on Tuesday and only being resolved on Friday.

All four of the bank’s brands – RBS, NatWest, Ulster Bank and private bank Coutts – were affected. Many customers took to Twitter to express their anger and exasperation at the latest computer failure, which left some without salary payments, tax credits and disability allowances. In 2013, the bank’s online operation was disrupted by a denial-of-service attack.

It is believed investors will ask whether the loss-making bank faces new regulatory fines for the latest malfunction, as the Prudential Regulation Authority has confirmed it is looking at the situation.

A bank spokesman said on Friday: “We are extremely sorry for the inconvenience and distress that this has caused our customers. If any customers are still experiencing issues please contact our call centres or come into a branch where are our staff are ready to help.”

The episode is embarrassing, as McEwan has said repeatedly that he wants to make the bank “simpler and safer” amid ongoing fallout from various scandals, such as mis-selling of payment protection insurance.

However, the chief executive admitted as the bank made annual losses last year that he expected there to be further operational and regulatory “bumps in the road”.

Despite the consumer uproar, the City reacted coolly to last week’s events. Ian Gordon, banking guru at broker Investec, said: “It’s an embarrassment, but in financial terms it is a relative non-issue for the stock market.

“Frankly, there was almost no movement in the RBS share price when it happened. Even if there is a further regulatory fine in response at some stage, it would probably be relatively insignificant in group terms and does not affect the underlying strategic turnaround which should see the bank throwing off capital in 2016.”

Gordon is forecasting a further loss at RBS this year of £2 billion. There is also potential for shareholder dissatisfaction at this week’s annual general meeting about boardroom pay.

The group has revealed that 72 bankers earned £1m in 2014 – the same as the year before des­pite sustained losses and more fines for past wrongdoing.

McEwan decided to forgo a £1m role-based incentive, but was still paid £1.85m for 2014, including a £1m basic salary, £143,00 in benefits, £350,000 for his pension and £358,000 from a long-term bonus award.

Shareholder advisory group Pirc said the pay relative to RBS’s financial performance was “not acceptable” and has branded awards under the bank’s long-term share plan as “excessive”.

On a more positive note, RBS’s directors will welcome Chancellor George Osborne’s plans to begin the sell-off of the taxpayer’s 79 per cent stake in the bank in the coming months.