RBS Group fined $88 mn for IT system failure

The Royal Bank of Scotland Group was fined 56 million pounds ($88 million) by British regulators for its IT system failure in June 2012 which left customers unable to access banking services, it was reported Thursday.

According to joint announcements from the Financial Conduct Authority (FCA) and the Bank of England (BoE), the group’s three banks — Royal Bank of Scotland (RBS), National Westminster (NatWest) and Ulster Bank — will pay FCA 42 million pounds and the BoE’s Prudential Regulation Authority 14 million pounds, Xinhua reported.

The IT failure affected over 6.5 million customers in Britain for several weeks, said FCA.

Over the course of that period, customers could not use online banking facilities to access their accounts or obtain accurate account balances from ATMs. They were also unable to make timely mortgage payments and were left without cash in foreign countries.

Indian IT sector

In addition, the three banks applied incorrect credit and debit interest to customers’ accounts and produced inaccurate bank statements. Some organisations were unable to meet their payroll commitments or finalise their audited accounts, said FCA.

Tracey McDermott, director of enforcement and financial crime at FCA, said: “The problems arose due to failures at many levels within the RBS Group to identify and manage the risks which can flow from disruptive IT incidents and the result was that RBS customers were left exposed to these risks.”

Andrew Bailey, CEO of the BoE’s Prudential Regulation Authority, said: “It is crucial that RBS, NatWest and Ulster Bank fix the underlying problems that have been identified to avoid threatening the safety and soundness of the banks.”

The FCA said it found that the three banks did not have adequate systems and controls in place to identify and manage their exposure to IT risks.

The three banks agreed to settle at an early stage of the investigation and therefore qualified for a 30 percent Stage 1 discount.