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RBS closes branches after axing challenger bank project

Royal Bank of Scotland to close 162 branches and shed 800 jobs after deciding not to create a challenger bank – but a new digital bank may be on the way

The Royal Bank of Scotland (RBS) has announced the closure of 162 branches and the loss of nearly 800 jobs after deciding to end its plan to launch its Williams & Glyn challenger bank business, which would have used the branches.

Customers have been told they can use their local NatWest branch instead.

Blaming complex IT challenges, RBS cancelled a plan to create a challenger bank, known as Williams & Glyn, from part of its business as a condition of its government bailout, imposed by the European Union (EU).

The EU insisted that RBS would have to divest part of its business, creating a new standalone bank, when the bailout was agreed. This part of the organisation includes hundreds of RBS branches.  

But in 2016, the plan was abandoned because complexities related to separating the operation had led RBS to abandon the IT project. “Due to the complexities of Williams & Glyn’s separation, while good progress has been made on the programme to create a cloned banking platform, the board concluded that the risks and costs inherent in the programme are such that it would not be prudent to continue with this programme,” RBS said in a statement at the time.

This has resulted directly in the branch closures and job cuts announced. RBS added: “We are no longer launching Williams & Glyn as a challenger bank, and we now have two branch networks operating in close proximity to each other – NatWest and Royal Bank of Scotland, in England and Wales.

“As a result, we have had to review our overall branch footprint in England and Wales and we have made the difficult decision to close a number of Royal Bank of Scotland branches.”

However, RBS is planning to launch another bank, according to reports. In March, it was reported that RBS is planning to establish a digital bank to be run separately from its existing business.

According to Sky News, which broke the story, former RBS COO Mark Bailie is leading the project. Citing an insider, the report said tens of millions of pounds have been allocated to the new digital platform, which might not result in a new company being created.

Read more about IT projects to split banks

  • Spanish bank Banco Santander has pulled out of its £1.7bn agreement to take over 316 RBS branches because of IT integration problems.
  • Problems related to creating an IT platform for RBS’s planned divestment look set to cause delays.
  • Spanish bank Sabadell is to move TSB IT systems to its own in-house core banking platform.

This reflects the complexity of moving customer accounts from legacy systems. The fact that RBS has abandoned the creation of a challenger bank due to IT complexities but is now planning to launch a digital challenger bank from scratch is telling.

Setting up a digital bank from scratch means there are no legacy IT systems to manage and no highly complex customer migration project to undertake. It also means that the bank can operate with far fewer employees and have a much lower cost base.

Meanwhile, TSB is currently experiencing the challenge of creating a new bank from an old one and has hit huge IT problems. When Sabadell acquired TSB in 2015, it said it would move customers to a new banking platform, and has been planning the transfer ever since. The plan was to move customers across in stages, and the Proteo4UK platform was rolled out to the bank’s staff in November 2017 with a full range of banking services.

The bank said the migration would not only save it £160m a year, but would enable it to build its own digital services in an industry where customers increasingly want digital banking services.

But when TSB began transferring millions of customer accounts to its new core banking platform on Friday 20 April, some customers were soon hit with major problems, including being unable to access accounts, money appearing and disappearing, and customers being able to see other people’s accounts.

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