RBS braces for IT meltdown fines over blocked accounts
A €3.5m fine was imposed last week on Ulster Bank by Central Bank over same failures
RBS could be slapped with a penalty of up to £50m by the Financial Conduct Authority. Photograph: Simon Dawson/Bloomberg
Royal Bank of Scotland is braced for a fine worth tens of millions of pounds as soon as this week for a major IT meltdown that left customers without access to their accounts.
It follows last week’s €3.5 million fine imposed on its Irish arm, Ulster Bank, by the Central Bank over the same IT failures.
RBS, which is 81 per cent owned by the UK government, could be slapped with a penalty of as much as £50 million from Britain’s Financial Conduct Authority (FCA) over the collapse of its IT systems two years ago, according to people familiar with the situation.
The systems failure in June 2012 followed a technology upgrade that malfunctioned, leading to a backlog of 100 million unprocessed payments across RBS and its NatWest and Ulster Bank units within a few days.
The fine also follows a hefty penalty incurred by RBS last week for its part in manipulating the currency markets.
RBS was forced to pay £400 million in total to the FCA and the Commodity Futures Trading Commission, a US regulator, for failings in controls that allowed traders manipulate foreign-exchange rates.
HSBC, UBS, Citi, JPMorgan Chase and Bank of America also agreed to settle with a number of financial regulators, pushing the total penalty above $4 billion (€3.2 billion). However, Barclays pulled out of the deal at the last minute, saying it was seeking a “more general co-ordinated settlement” with other watchdogs.
Although the fine for IT failings will be much smaller, it highlights the mounting regulatory scrutiny over lenders’ antiquated IT systems.
The FCA launched an investigation last year into RBS’s IT meltdown, which cost the bank £175 million to resolve. Stephen Hester, who was chief executive at the time, also chose to forgo his 2012 bonus to assuage customers.
RBS declined to comment yesterday. – (Copyright The Financial Times Limited 2014)