UK bank IT systems are long way from being robust, a senior Bank of England official has said, while giving evidence at the Northern Ireland Affairs Committee at Westminster.
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Sam Woods, a director in the Bank of England's Prudential Regulation Authority, made the comments after being asked about the Royal Bank of Scotland IT crash in 2012, which also hit Ulster Bank.
According to the BBC he said: "I feel we are a very long away from being able to sit here with confidence and say that the UK banks' IT systems are robust."
The regulator has approached UK banks to find work out the likelihood of an RBS-like crash occurring at their organisations.
“When RBS had problems last year, the regulators contacted other banks and we had to provide statements and evidence to show how we would not suffer a similar fate,” said one senior IT source in the UK banking sector.
In 2012 problems with IT systems at the Royal Bank of Scotland (RBS) meant customers were unable to access their accounts for days.
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The glitch in the CA7 batch process scheduler ended with 12 million customer accounts being frozen. Customers were unable to access funds for a week or more as RBS, NatWest and the Ulster Bank manually updated all the account balances.
Then in December 2013 on the busiest shopping day of the year, problems stopped customers making online and card payments.
RBS has since admitted that its IT systems needs to be overhauled after decades of under-investment.
An IT director at a bank, who wished to remain anonymous, said the problem is endemic in the banking sector. “I think all banks have similar risks but RBS has suffered more than most. There is a fine between being just OK and just not OK.
"The pressure on cost after 2008 has been significant and firms are also having to pay out large fines, compensation or cover trading losses which does not help.” He said there are many more problems than those brought to the public’s attention.
“There are numerous near misses every day and minor issues that don't reach the media. I think RBS has been unlucky but it could happen anywhere. These firms also have outages abroad that don't hit the UK press.”
Chris Skinner, chairman at the Financial Services Club, said reluctance to replace systems that work makes problems inevitable. “Most UK banks are stuck on legacy systems, built in the last century, that work. Their reluctance to change these core systems is for the very reasons that RBS experienced. As a result, most banks add middleware and front-end systems to their core systems, rather than replacing the core.”
Jean-Louis Bravard, director at Burnt-Oak Partners and former CIO at JP Morgan, said UK banking IT faces major challenges. "Bank IT in the UK is not OK.”
He said it is unlikely that RBS is alone among banks “in relying on obsolete legacy IT surrounded by an ever-increasing plethora of newer systems to give consumers the impression that the banking systems are fit for purpose in our internet and smartphone world”.