RBS Fined for IT Failure -- Update

   By Max Colchester and Alex MacDonald 
 

LONDON--U.K. regulators on Thursday fined Royal Bank of Scotland Group PLC (RBS) 56 million pounds ($87.8 million) for a 2012 computer failure that saw millions of customers unable to access their accounts.

The U.K.'s Financial Conduct Authority fined RBS and two of its subsidiaries, National Westminster Bank PLC, or NatWest, and Ulster Bank Ltd. GBP42 million, while the Prudential Regulation Authority fined the three banks GBP14 million. RBS said it has already provisioned for the fine.

In 2012, RBS's payments systems failed after a routine upgrade resulting in 6.5 million customers being unable to transfer money, make payments or get accurate account balances for several weeks. The FCA said this wasn't the result of RBS's failure to invest in computers systems, rather the bank didn't have adequate testing procedures in place for the software upgrades.

RBS said it has since spent an additional GBP750 million on its computer infrastructure and payments-processing system. The bank had already put aside GBP175 million to compensate customers affected by the incident.

"Our IT failure in the summer of 2012 revealed unacceptable weaknesses in our systems and caused significant stress for many of our customers," said Philip Hampton, chairman of RBS. As I did back then, I again want to apologize to all customers in the U.K. and Ireland that we let down two and a half years ago."

Previous RBS Chief Executive Stephen Hester waived his 2012 bonus following the IT meltdown. On Thursday the bank also disclosed it cut the bonus pool handed out to its technology department by GBP6 million.

The 2012 computer meltdown was widely seen as a warning shot for British banks who had failed to adequately overhaul their aging technology. On Thursday regulators said they had been in touch with the chairmen of other U.K. banks to ask what their boards were doing to assess the risks of a serious technology failure.

"Modern banking depends on effective, reliable and resilient IT systems," said Tracey McDermott, director of enforcement and financial crime at the FCA. "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 fine is the first ever meted out by the PRA, a regulator whose job is to oversee financial stability rather than conduct.

RBS's Irish unit, Ulster bank, had already been fined EUR3.5 million by the Irish central bank over the debacle.

Write to Max Colchester at [e-mail] and Alex MacDonald at [e-mail]

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