Watchdog challenges RBS over IT meltdown
THE City watchdog is demanding answers from Royal Bank of Scotland on why a technical glitch left millions of customers unable to pay bills or access their money.
• Chief executive Stephen Hester says bank has ‘turned a corner’
• Senior executives will face “proper accountability”
• Bank fault has entered its seventh day as customers struggle to access their accounts
RBS chief executive Stephen Hester maintained his organisation was “well on the road to recovery” as it continues to deal with the fallout, which analysts believe could cost the institution hundreds of millions of pounds.
However, a spokeswoman for the Financial Services Authority (FSA) said officials at the watchdog would be working closely with the company to glean answers about what had gone wrong.
She said: “We are working very closely with the firm. We want to know what is going on. Ultimately, we will want to know what has happened here.” She refused to confirm whether RBS was under formal investigation following last week’s IT meltdown.
Speaking from the company’s headquarters in Gogarburn near Edinburgh on Monday, Mr Hester reassured customers that a “corner has been turned” in the wake of the computer problem which has left customers unable to
access wages, pay bills or view balances since last week.
With the crisis entering its eighth day today, around 1,200 RBS, Natwest, and Ulster Bank branches will extend their opening hours from 8am to 6pm for the rest of the week to allow account holders access to money.
The banking group also told customers it would waive a series of charges including overdraft fees, allow an additional £100 to be withdrawn above credit card limits and waive fees on cash advances.
Mr Hester said he expected that the backlog of transactions would be resolved by Friday, but rejected claims that outsourcing and job cuts had caused the computer difficulties.
He said: “We’re very sorry for the inconvenience it’s caused our customers. Our customers come first and we’re doing everything we can to put that right. I’m pleased to say the news, as we thought it would, is turning better. I think we’re well on the road to recovery. We feel a corner has been turned.”
The problems reportedly arose following an attempt to install a software update on RBS’s payment processing system, which was then corrupted.
Mr Hester promised a review of “broader issues” and “levels of contingency”, but praised his staff for “working night and day, through the weekend” in order to tackle the problems.
Union officials have said “serious questions” must be asked of the Edinburgh-based group’s management in the wake of the turmoil, with Unite pointing out 30,000 jobs have been shed since Mr Hester took the helm of RBS.
David Fleming, Unite’s national officer, said: “Serious questions must be asked as to why constant job cuts are being made when there are clearly serious issues which need addressing by management. Customers and staff have the right to expect more from their bank.”
Some have pointed to the job cuts and IT outsourcing to India as a factor, but Mr Hester said there was “no evidence” to support those claims, and that its Edinburgh base remained the “main IT centre”.
The crisis has echoes of problems at Northern Rock in 2007. Technological failure caused a crisis of confidence among customers who could not access their online accounts. The FSA has since insisted all banks increase their server capacity, so that they are able to handle online traffic equivalent to 300 per cent of normal peak demand.
Gary Greenwood, an analyst at Shore Capital, said the problems could cost RBS hundreds of millions of pounds in compensation and overtime bills. He said: “The extra cost of branch openings and fee waivers is likely to cost the company tens of millions of pounds, although compensation costs for customers could push the total cost into the low hundreds of millions of pounds.”
Liberal Democrat peer Lord Oakeshott said Mr Hester should not receive a bonus given the scale of the problems, reasoning: “Like the boss of a water company who has turned customers’ taps off for a week, there is no question in my mind that Stephen Hester should not be eligible for a bonus for 2012 after this fiasco.”