An IT meltdown landed Royal Bank of Scotland with more big fines yesterday after millions of its customers were left unable to access key banking services.
Penalties totalling £56 million from the UK’s two financial regulators are on top of £70m in redress paid to customers after the systems crash in 2012, which affected RBS and its divisions NatWest and Ulster Bank.
A week ago, the banking giant paid about £400m in a settlement with UK and US regulators following its role in foreign exchange rate rigging.
RBS admitted to “unacceptable weaknesses” in its computer systems as around 6.5 million customers – equivalent to 10 per cent of the UK population – suffered disruption lasting for several weeks in some cases.
They were unable to use online banking facilities or obtain accurate account balances from ATMs. Mortgage payments were delayed and customers left without cash in foreign countries. Among other problems, the banks applied incorrect credit and debit interest to customers’ accounts and produced inaccurate bank statements.
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The Bank of England’s Prudential Regulation Authority, which issued a fine of £14m, said the failures had the potential to harm stability in the financial system by disrupting the clearing system, which is used to settle payments among banks and is fundamental to financial markets. The issues in June 2012 stemmed from a botched upgrade to software that processed updates to customers’ accounts.
When it noticed problems with the upgrade, the bank’s central IT function decided to uninstall it without first testing the consequences of that action.
The Financial Conduct Authority, which fined RBS £42m, highlighted the banking group’s failure to put in place adequate systems and controls to identify and manage exposure to IT risks.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said there were “failures at many levels”.
She added: “Modern banking depends on effective, reliable and resilient IT systems. The banks’ failures meant millions of customers were unable to carry out the banking transactions which keep businesses and people’s everyday lives moving.”
The meltdown has resulted in RBS’s Ulster Bank receiving a record fine of almost £2.75m from the Central Bank of Ireland.
RBS group chief administrative officer Simon McNamara last night said he would prefer not to have to pay the fine but it would not “break the bank”. RBS was working to ensure the problems were not repeated, he said.
Mr McNamara said: “We’ve invested a significant amount making sure we are in a much, much better position than we were back in 2012.”
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