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Leading UK Bank Hit With $87.6 Million Fine over IT Failure

By Tristan Hugo-Webb
November 20, 2014
in Analysts Coverage
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Stemming from a 2012 IT system failure that left over 6.5million UK customers struggling to access their accounts and other banking andpayments services over the course of several weeks, the Royal Bank of Scotlandand its subsidiary Ulster Bank have been issued with a $87.6 million fine fromBritish regulators.

During the IT failure, customers could not use onlinebanking, access their accounts or obtain accurate account balances from ATMs andin terms of payments, customers of RBS were not able to make on time mortgagepayments or withdraw cash while abroad. Furthermore, RBS and its subsidiaries applied incorrect credit and debitinterest to customers’ accounts and produced inaccurate bank statements and onthe corporate side some organizations were unable to meet their payrollcommitments or finalize their audited accounts.

Commenting on the fine, Tracey McDermott, director ofenforcement and financial crime at the FCA said, “Modern banking depends oneffective, reliable and resilient IT systems. The banks’ failures meantmillions of customers were unable to carry out the banking transactions whichkeep businesses and people’s everyday lives moving.”

The IT failure at RBS in 2012 highlighted the importance ofIT in everyday banking and payments and with the growing use of digitalchannels; a bank’s IT infrastructure is increasingly stretched. While legacysystems have served banks well and the prospect of transitioning to newersystems is daunting given the cost, unless banks are willing to make theinvestment, it is likely that more IT system failures will happen and fineswill follow.


Overview by Tristan Hugo-Webb, Associate Director, International Advisory Service for Mercator Advisory Group

Read full story at Finextra

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