TSB Bank fined £48 million for technical failures in IT systems upgrade
“The failings, in this case, were widespread and serious which had a real impact on the day-to-day lives of a significant proportion of TSB’s customers, including those who were vulnerable.”
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have teamed up to fine TSB Bank plc a total of £48,650,000 for operational risk management and governance failures, including management of outsourcing risks.
The charges relate to the bank’s IT upgrade program, in which technical failures ultimately resulted in customers being unable to access banking services.
TSB was fined £29,750,000 by the FCA and £18,900,000 by the PRA. TSB agreed to resolve this matter with the FCA and PRA qualifying it for a 30% discount in the overall penalty imposed by both regulators.
Without this discount, the FCA and PRA would have imposed a combined financial penalty of £69,500,000 (£42,500,0000 by the FCA and £27,000,000 by the PRA).
Real impact on the day-to-day lives
Mark Steward, FCA Executive Director of Enforcement and Market Oversight said: “The failings, in this case, were widespread and serious which had a real impact on the day-to-day lives of a significant proportion of TSB’s customers, including those who were vulnerable. 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, with adequate risk management systems.”
Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said: “The PRA expects firms to manage their operational resilience as well as their financial resilience. The disruption to continuity of service experienced by TSB during its IT migration fell below the standard we expect banks to meet.”
Disruption in TSB’s branch, telephone, online, and mobile banking
The issues with TSB’s IT systems took place in April 2018, when the bank updated the systems and migrated the data for its corporate and customer services on to a new IT platform.
This resulted in significant disruption to the continuity of TSB’s banking services, including branch, telephone, online, and mobile banking.
All of TSB’s branches and a significant proportion of its 5.2 million customers were affected by the initial issues. Some customers continued to be affected by some issues and it took until December 2018 for TSB to return to business-as-usual. TSB has paid £32.7m in redress to customers who suffered detriment.
TSB’s IT migration programme was an ambitious and complex IT change management programme carrying a high level of operational risk. Its success was critical to TSB’s ability to provide continuity of critical functions and safety and soundness. However, the regulators’ found that TSB failed to organise and control the IT migration programme adequately, and it failed to manage the operational risks arising from its IT outsourcing arrangements with its critical third-party supplier.
Operational resilience is a priority for both the FCA and PRA. As demonstrated by this incident, operational disruption can cause wide-ranging harm and it is critically important firms invest in their resilience.