Andrew Tyrie blasts banks and regulators over IT failings

The Treasury Committee chairman wants faster action to improve banks' creaking IT systems. He has a point

Conservative MP Andrew Tyrie chairs the Treasury Select Committee (House of Commons)

When banks lay people off you’ll often see from their press releases that they’re going to cut back on “support” functions.

The people who do these jobs; secretarial, admin, IT support, tend to be classified as “costs” because they don’t directly generate revenue for their employers to make a return on.

As a result, when revenues look like they’re going to fall, these are the people who find themselves at the sharp end of cost cutting programmes.

The problem with this approach is clear. If you cut too deeply into support functions it will inevitably impact on frontline staff and impair their ability to generate the revenues you are after.

Their productivity will be impaired if they have to do jobs that would have been done by “support” staff before they were cut.

With IT staff the problem goes much deeper than that. These days if your IT isn’t up to scratch you might as well get out of the game. Cutting back on IT is like cutting of your nose to spite your face and it will come back to bite you quicker than you can say “computer virus”.

Increasingly banks are realising this. But that’s only a relatively recent development. I spent years writing about job cuts as a banking correspondent and almost inevitably IT roles would be mentioned among them.

The big banks have, in fact, spent decades under investing in IT and IT staff, seeing it as a cost when the real cost has been proved to be not spending enough.

Unfortunately it’s not only the banks that are having to meet this cost. It’s you and me, when we get locked out of our bank accounts, or find that some glitch or another has messed up payments we were trying to make, or that our details have been compromised or our identities stolen.

There have been several such incidents involving Royal Bank of Scotland, which suffered from Fred the Shred Goodwin shredding investment in IT. RBS is hardly alone, however.

Against this backdrop Treasury Committee chairman Andrew Tyrie has written one of his cross letters to Sam Woods, deputy governor of the Bank of England and chief executive of the Prudential Regulation Authority, and to Andrew Bailey, chief executive of the Financial Conduct Authority, to request further assurances from the regulators that they are taking action to strengthen the resilience and security of IT systems in financial services.

He’s worried that they don’t yet appear to have sorted out who is responsible for what, and that even while the industry is slowly waking up to its problems, it still hasn’t got to grips with how serious they are.

He wants the regulators to give them a kick and so he’s giving the regulators a kick. Given recent incidents he’s right to be doing so.