New watchdogs launch inquiry into RBS IT fiasco
Bank could face big fines as it admits 'unacceptable' failure that blocked accounts
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Tuesday 09 April 2013
Financial watchdogs are to launch an enforcement investigation into the Royal Bank of Scotland's information technology failings that left some people locked out of bank accounts for more than a month.
The announcement, which could result in heavy fines, was made as the two new City regulators said they were increasing the overall regulatory budget by 15 per cent to an all-time high of about £650m. RBS's IT glitches sparked outrage after the extent of the problems and their impact emerged last summer. Although most people were able to access their accounts after a short time, some customers in Northern Ireland were left stranded for weeks.
The investigation is being conducted jointly by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), and is the first major investigation they have instigated since they were created to replace the Financial Services Authority.
It is unusual for financial regulators to make such a public announcement of an investigation – they have been looking informally at the affair since last year. However, their rules do allow for such a step to be taken in "exceptional circumstances", and that would appear to be the case with RBS, given the public interest in the state-owned bank and the anger at what occurred.
In a statement, the FCA said: "The Financial Conduct Authority has started to conduct an enforcement investigation into the IT failures at RBS which affected the bank's customers in June and July 2012. The FCA will reach its conclusions in due course and will decide whether or not enforcement action should follow that investigation."
The PRA said: "Both regulators will work closely together to ensure there is no unnecessary duplication of work, and upon the completion of this investigation each will decide whether it is appropriate for it to take any enforcement action."
While the FCA handles conduct, the PRA oversees financial soundness and systems and controls.
It is unclear whether any individuals will be targeted by the inquiry, although sources said they would only be able to take action if clear lines of accountability could be established.
RBS has faced a number of IT problems, in part because of the number of different banks which were combined to create the group. The bank said: "Last summer's IT failure was unacceptable. We have already made significant improvements, and over the next three years will invest hundreds of millions in our systems. We will be working closely with our regulators in the UK and the Republic of Ireland. Our customers deserve a service they can rely on 100 per cent of the time and that's what we want to provide."
The costs of succesful investigations are met by firms. However, news of the budget increase still had the City wincing. In previous years fine revenue has been used to reduce fees, but only £40m will be available for that this time around after Mr Osborne announced plans for bank fines to go to good causes.
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