(Gareth Fuller/PA)
(Picture: PA Archive)TSB has been slapped with a fine of almost £50 million for the disastrous systems meltdown that left around two million customers locked out of their accounts for weeks in 2018.
The IT collapse caused one of the biggest financial outages since the inception of internet banking and led to over £33 million being paid out to customers as well as the departure of the high street bank’s then chief executive, Paul Pester.
It struck when the bank was trying to move customers to a new platform, which it failed to test properly according to a subsequent report. The botched migration followed a change of ownership -- from Lloyds Banking Group to Sabadell of Spain -- and during the crisis, TSB turned down an offer of help from its former parent.
Today, the Financial Conduct Authority fined TSB £48.6 million for “operational risk management and governance failures,” which left people unable to pay bills and move money. The City watchdog said TSB’s entire branch network and a significant portion of its customer base were affected by the problems and it took the bank until December 2018 to fully return to business as usual.
TSB was carved back out of Lloyds and sold to Sabadell for £1.7 billion in 2015. The disposal came when regulators moved to increase competition among high street banks after the wave of consolidation caused by the 2008 financial crisis, which brought Lloyds and Halifax Bank of Scotland together, reshaping the market for retail accounts. The sale restored the TSB name – Trustee Savings Bank -- to the UK high street over the 632 branches Lloyds sold.
That deal sowed the seeds of the IT meltdown. The financial records and live account details of just over 5 million customers needed to be moved from systems run by Lloyds to those of its new parent. The transfer was supposed to occur over one weekend in late April, with customers warned that online banking would be unavailable. It turned out that some accounts were not working a month later.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “The failings in this case were widespread and serious which had a real impact on ... day-to-day lives.
“The firm failed to plan for the IT migration properly, the governance of the project was insufficiently robust and the firm failed to take reasonable care to organise and control its affairs responsibly and effectively.”
Jenny Ross, money editor at consumers’ organisation Which? said: ““It’s encouraging that the regulator has taken strong action today, sending a clear message to other firms that damaging IT glitches will not be tolerated.”
Sabadell has recently denied reports that it was considering selling TSB, amid talk that veteran City figure Edi Truell, partner and founder of the Pension Super Fund, was considering setting up an investment vehicle to make an offer.
TSB’s CEO, Robin Bulloch, said: “We’d like to apologise again to TSB customers who were impacted. “We worked hard to put things right for customers then and have since transformed our business.”
Tim Wright, Partner at Fladgate LLP, called the IT meltdown “the latest in a long line of poorly executed and technology transformations with near existential consequences,” branding it “a PR disaster”.
