The most important business of banks is not even accepting deposits or making loans. The primary task is something much simpler: moving funds from one customer's account to another so that people don't have to walk round with large supplies of cash to pay their bills. This activity is called money transmission. However much you puff yourself up, you are not really a bank if you cannot do it. Yet for a week, Britain's second largest banking group, the Royal Bank of Scotland, has been unable to carry out this function reliably.
It is a very shocking situation. Nor is it over. The latest statement informs us that Royal Bank and its subsidiary, NatWest, are continuing to try to update "a few specific sets of transactions"; that "a small number of customers may experience delays as we return to a completely normal service" and that the customers of Ulster Bank, another subsidiary of this over-ambitious Scottish group, will find this week they will "experience unacceptable delays to their accounts being updated".
What does this actually mean? Here is how customers have described it in messages to the bank. Customer A: "I have not yet received my wages or child benefit, am unable to speak to anyone as phone lines are jammed. As a working parent this is totally unacceptable, I've little money and have to cover childcare, food, travel and electricity. I would love to know when I am likely to get my wages in my account but cannot speak to anyone to find out!!!"
Customer B: "I went to pay my rent and council tax and card was declined!! I then had to go to the bank and withdraw the money that way... not good at all is it?" Customer C: "My wages went in on Friday & I thought I hadn't been affected & I got an embarrassing shock at petrol station when filling up as my card declined & my wages had been taken back out. NOT EVEN A COURTESY E-MAIL TO ALLOW ME TO MAKE CONTINGENCY PLANS!!!"
So we have heard from the customers and we have heard from the bank, but there is a third party involved which hasn't yet said a word. This is Her Majesty's Government, which owns 84 per cent of the shares of RBS. It beggars belief that the owner of a large organisation that has failed to deliver an essential service to millions of people has made no comment. The owner bears a responsibility here as well as the board of directors and senior staff. Moreover politicians don't usually miss an opportunity to comment on whatever is happening, even if their opinions lack relevance or interest.
Why so silent on this occasion? Probably for the very compelling reason that there are no votes in it. However, there are two reasons why a short statement now with the promise of a longer comment once the situation is clearer would be appropriate. It would give customers reassurance that somebody over and above the board of directors is looking out for their interests. It would also show that the major shareholder well understood that management deficiencies at RBS run deep and that some dramatic board changes will need to be swiftly set in train.
Outsiders can only guess what went wrong. RBS itself has given no explanation. At heart of the problem was a serious technical error. If the culprit is an employee of the bank, this raises questions about staff recruitment and selection. If, as some have suggested, a service company based in India was responsible for the fault, then this raises a different set of questions regarding supervision of suppliers. Very quickly the question becomes not so much what was the error but why was it allowed to happen.
The upgrade of the bank's computer system that gave rise to the incident took place during the working week rather than at the weekend. Was this unfortunate timing unavoidable? There seems to have been no contingency plan to deal with such situations. The Governor of the Bank of England, Sir Mervyn King, speaking to MPs on Tuesday, alluded to this. Why did it take so long to sort out the issues, he wondered.
Then there is the question of the bank's treatment of its customers in Northern Ireland. Because of what is obviously a lack of resources in the information technology (IT) area, Irish customers have had to wait until the problems affecting British customers were first rectified. Did anybody tell people doing their business with Ulster Bank that they were second-class citizens? The incident also raises questions about how the bank's massive redundancy programme was planned. Having retained what one expert called "enormously complex IT systems, patched together out of multiple legacy networks", then experienced staff were needed to keep the behemoth in good shape. It looks as if they were foolishly let go.
If government were not composed mainly of people who have never spent a day in a business setting, it would know what to do. Wait for the report of what went wrong. If it shows serious deficiencies, press for management changes up to the level of chief executive. And if there is resistance, call an extraordinary general meeting and force the changes through with the Government's voting power. Unfortunately, nothing so forthright is likely to happen.