James Moore: Why our new watchdogs should put the boot into RBS for its IT blunder

The bovver boys have finally donned their hobnailed boots and headed off down to Royal Bank of Scotland's headquarters to create a ruckus in the wake of last year's IT snafu that left some customers locked out of their accounts for a month or more.

An enforcement investigation doesn't necessarily mean there will be fines coming. But look at it this way: this is the first major action instigated by the newly created Financial Conduct Authority and its partner in (fighting) crime, the Prudential Regulation Authority.

Were nothing to emerge from such a high-profile event then they'd look pretty silly. Just imagine the fun the Treasury Select Committee would have with their respective chief executives were the two watchdogs to decide that there was no case to answer on the part of the bank.

Just imagine the reaction from those affected. Some were locked out of their bank accounts for more than a month. Admittedly only a small number, but the stress that those people must have been caused doesn't bear thinking about, particularly if their finances were at or close to a knife edge and they faced difficulties with loans or mortgages.

True, RBS quickly said it would ensure that no one lost out, and rightly so. But that's not really the point. It shouldn't have happened in the first place.

Which leads us to the question of penalty. If the regulators decide one is due, we will in effect see one arm of the state fining another arm. While justice must be seen to be done, not least to ensure that other banks are aware that there will be consequences from allowing this sort of thing to occur, that's ultimately a bit pointless.

As I've said before, the new regulators need to fine not harder, but smarter. Fining corporate entities doesn't appear to have all that much impact upon them because they typically tend to pass the fines on to their shareholders. The shareholders who count, the City institutions, then write the cost of the penalty off as a one-off "exceptional item". They might issue a mild rebuke to management over lunch when they stop by for a chat but that's as far as it goes.

It's true that RBS reduced the size of its bonus pools to at least partially take account of the fines levied against it as a result of the Libor fixing scandal.

But it was IT that caused this one and the failure to integrate and update various systems that the bank ended up with as a result of the acquisition spree undertaken by Fred Goodwin and his merry men – most of whom have now long since departed. You can't really ask existing staff to pay for their failings.

Perhaps, however, this affair could open the door to some of those departed individuals being brought to account for their misrule.

Regulators have repeatedly talked of the difficulty in assigning responsibility within banks for decisions that go beyond the merely bad and look, in retrospect, to have been negligent. But that doesn't mean they shouldn't try.

If they can do that in this case it will have been worthwhile, and show that the new watchdogs have learned from the mistakes of the old one.