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RBS fined and reclaims £6m from staff over IT bungle

Ross McEwanRoyal Bank of Scotland has been fined £56  million for a series of IT failures that left customers unable to access their accounts.

The bank revealed this morning that it had cut £6m from the pay packets of 16 members of staff following the debacle which caused mayhem for thousands of customers in the last two years.

On one occasion before Christmas last year more than 1 million customers had difficulty withdrawing cash or paying for goods on one of the busiest shopping days of the year.

Insiders at the bank blamed a series of cutbacks on the IT department which were imposed after the financial crash of 2008.

Ross McEwan (left), the current chief executive admitted there had been under-investment for years. He has set aside £1 billion to improve the bank’s IT infrastructure.

It is the latest penalty imposed on the bank. Only last week it was fined for its part in the rigging of foreign exchange trading and is still facing legal action over its share issue in 2008.

This morning (Thur) it announced that it had  reached a settlement with the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) for failings in relation to the 2012 IT incident. RBS has agreed a penalty of £42m with the FCA and £14m with the PRA.

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

 “I am confident that the progress we have made – in increasing the resilience of our IT systems through the additional investment of hundreds of millions of pounds and the enhancement of our control structures – has made RBS better able to provide the service our customers expect and deserve. I am also pleased that the regulator acknowledged the steps we took at the time to provide redress to anyone who had lost out as a result of our mistakes.”

Simon McNamara, RBS chief administrative officer, said: “When I arrived at RBS in 2013, my number one priority was to ensure that any investment in I.T. was targeted in the right areas. As a result, by the end of 2015 we will have invested an additional £750m in enhancing the security and resilience of our IT systems.

 “A lot has changed and much has been achieved already. Our systems are currently available to customers over 99.9% of the time. By any measure, this is some achievement. But, given the impact that any incident has on our customers, I want to do better.”

The FCA and PRA note that RBS has paid £70.3m in redress to UK customers and £460,000 to individuals and firms who were not customers.

 RBS has also today fulfilled its commitment to publish its own key findings in relation to the incident.

In 2013, RBS announced an increased investment of £750m for a three year period, over and above its annual I.T. spend, to enhance the security and resilience of its I.T. systems.

On the failure in 2012, the batch processing system, significant changes have been made, said the bank. Since March 2014, it has put in place four dedicated and separate batch schedulers for NatWest, RBS, Ulster Bank NI and Ulster Bank ROI, significantly reducing the likelihood of a single scheduler incident impacting more than one brand. Following separation the batch scheduler runs twice as fast as previously, processing around 20 million transactions across four brands per day. 20,000 changes have been made to improve and strengthen the batch environment and reduce the likelihood of future incidents.

The bank said it had introduced a number of other improvement including:

       A mirror bank  for the systems and data for key customer services so that should a system outage occur, RBS can still process customer transactions while we recover our systems.

       International payments which involves an upgraded and improved the supporting infrastructure around its core international payments system.

       Mobile banking – RBS has made the infrastructure that supports its mobile banking app more secure and, thanks to the recent investment, RBS has doubled its capacity for growth in the future. In addition, when things do go wrong, RBS can now recover much more quickly, minimising inconvenience for its customers.

As previously disclosed last week, the Central Bank of Ireland announced that it had fined Ulster Bank Ireland EUR 3.5 million in relation to the incident of June 2012.

A full accountability review involved 64 staff members and “adjustments” were made to the remuneration of 16 individuals, including voluntary waivers of 2012 bonus awards and reductions of outstanding unvested awards.

The bank said it made an 18% reduction in the bonuses for 2012 for Technology Services (the Department then responsible for running IT). In total the above actions on pay total c.£6 million.

This includes the previously disclosed decision by the the group chief executive, Stephen Hester and Jim Brown, chief executive of Ulster Bank to waive any bonus that might otherwise have been awarded to them in respect of 2012.

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