RBS Computer Glitch Could Cost Tens Of Millions of Pounds

--Millions of RBS clients were left without access to their money

--Problem could take several more days to resolve

--RBS dealing with problem on a day-by-day basis

 
   By Max Colchester 
 

LONDON--Royal Bank of Scotland Group PLC (RBS) warned that the computer glitch that has left millions of customers without access to their money could take several more days to fully resolve, as the bank continues to grapple with a problem that could cost it millions of pounds to resolve and cause significant damage to its reputation.

The 82% government-owned bank said in a statement Sunday that payment problems at its NatWest bank should be largely resolved by Monday but there "will be bumps in the road." NatWest's 1,200 branches opened early Monday morning to deal with customers struggling after a backlog of payments transactions built up following a computer error last Tuesday. A spokesman for the bank said Monday it was dealing with the problem on a day-by-day basis and that it couldn't quantify the cost of the problem or how long it would take to fully iron out.

The banking group, which holds close to 17 million business and personal accounts in the U.K., previously said that a large proportion of its customers had been affected by the payments problem. On Monday an RBS spokesman declined to comment on the exact nature of the computer failure except to say it had originated from a software program that handles overnight payments. The IT issue was being handled in the U.K., the spokesman said.

The fiasco comes as RBS braces for increasing competition in the U.K. retail banking sector. A series of new banks, including Virgin Money and Tesco PLC (TSCO.LN), are set to enter the market soon and attempt to steal market share with the promise of better customer service. Since its bailout by the government in 2008, RBS has cut 36,000 jobs to try and return to profitability. Unions have previously complained that the staff cuts have reduced customer service. RBS declined to comment.

However, some analysts played down the financial impact of the problem. "I would estimate that the cost could run into the tens of millions of pounds," said Ian Gordon at Investec. "If you ask about the reputation damage, that is harder." Mr. Gordon said that the issue didn't sabotage the investment case in RBS. At 0828 GMT, the bank's shares were down 0.5% at GBP2.41.

On Saturday Chief Executive Stephen Hester said in a message to customers that he was "very sorry for the difficulties people are experiencing." Mr. Hester said the RBS Group was working around the clock to resolve the problems as quickly as possible.

-Write to Max Colchester at [e-mail]