News & Views - Savantor

Bank fines for IT failings

Sunday, 09 November 2014
In November, RBS were fined £42 million by the Financial Conduct Authority (FCA) because of their IT failings in 2012 and the resultant impact on their customers. This formed part of a total £56 million fine issued jointly with the Prudential Regulation Authority (PRA). Whilst some will no doubt be saying "good, they need to get their house in order", others, with an arguably more pragmatic perspective, may well be a little bemused. Anyone who has dealt with IT infrastructure, especially on the scale required in the banking sector with its high level of regulation, ever-changing compliance rules and a dynamic service landscape, knows that its success is driven by investment in both existing and new platforms and hardware. Whilst punitive fines are a necessary weapon in a regulator's armoury and wholly appropriate in the right circumstances – e.g. the well publicised "dodgy dealings" in the City – choosing to deprive an organisation of cash that could be put to better use specifically addressing the problem in question (in whole or in part), to the benefit of their customers, seems to be a questionable result. The FCA directly refute the Bank's claim that the issues were caused through a chronic lack of investment for a number of years prior, stating that "The RBS Group spends over £1 billion annually to maintain IT infrastructure". It's no secret that escalating maintenance costs due to ageing infrastructure inhibit investment, in this case no doubt contributing to the banks failings relating to Principle 3. Given that this has proven to everyone that more investment is required, why deprive the Bank of £42 million now? FCA enforcement fines for 2014 to date have "raised" nearly £1.5 billion heading straight for the Treasury but here, surely, RBS, NatWest and Ulster Bank customers – the people directly affected by the down-time – would benefit from that £42 million being invested in customer-facing services rather than heading off to the Treasury's pockets. Fines aren't always the best solution – and a fiercely regulated industry doesn't necessarily benefit the customer as best it could.
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