Regulators continue to crack down on banks with flailing IT issues

| April 1, 2015 | 0 Comments

Regulators continue to crack down on banks with flailing IT issues

With news that the UK Regulators have recently fined three banks within the Royal Bank of Scotland Group for a staggering total of £56 million. Keytech take a look at the current state of banking IT systems and explore why fines that are issued are becoming increasingly commonplace.

The background to the £56 million fine

The news of this most recent fine dates all the way back to 2012, when the Royal Bank of Scotland banking giant experienced issues across its institutions (including RBS, NatWest and the Ulster Bank) in relation to the reliability of online banking services and the accuracy of account balances and transactions. The root cause, it was found, was a software update that caused major issues group wide.

A fine that is far from a precedent

Unfortunately such a fine is not without precedent and it may be argued that occurrences such as this happen far too often, such as the Deutsche Bank receiving a £4.7 million fine for extensive reporting errors throughout numerous IT systems. What’s more, many banks experience issues for which they are not then subject to fines, such as HSBC’s system having gone down for an hour in November 2014 and Barclays’ system crashing and staying down for in excess of two hours.

A broken banking app, Twitter and thousands of unhappy social media users

It seems that it isn’t just massive fines that such institutions should be worried about, as recent research has shown that as many as one in four consumers would seriously consider moving banks altogether following just one system failure.

This is then no better demonstrated by the recent, and additional, issues that NatWest have suffered as customers were left locked out of their banking app. Sky News reported that thousands took to Twitter to vent their frustrations and as every business should know, there is nothing more destructive than a reputation savaging by a trending hashtag!

Creaking banking systems are creating ripples within the markets

Not only can failing banking IT systems create both financial fines as well as damaging consumer distrust and dissatisfaction, but moreover ongoing issues and significant fines have served to create concern within the markets, which has been far from helpful given the precarious financial markets and banking industry over the past few years.

The trouble with Large IT Legacy Systems

The problem with legacy systems within institutions such as banks, or government wide systems such as that of the DWP’s, is the sheer scale of them. This can be compounded by IT projects each requiring a working within a set budget and within an impractical time frame, which consequently attracts substandard services and contractors. This very issue was explicitly admitted by Ross McEwan, RBS’ Chief Executive, when he stated that years of drastic underfunding for the group’s IT systems had led to substandard and ineffective upgrades.

For any modern bank working under the cosh of stringent regulations, managed IT services are essential; moreover however, managed IT services by professionals who appreciate the demanding nature of banking IT system is vital if such systems are to truly move forward and benefit from seamless launches.

Category: Press

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