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IT challenges may force RBS to miss EU deadline to split businesses

Problems related to creating an IT platform for the Royal Bank of Scotland’s planned divestment look set to cause delays

The Royal Bank of Scotland says difficulties in creating an IT platform for the businesses it agreed to split off as part of its taxpayer-funded bailout mean it could miss the EU-imposed deadline.

RBS had to divest part of its business, creating a new standalone bank, after the bailout was agreed. This part of the organisation, which includes hundreds of RBS branches, is known as Williams & Glyn.

An EU ruling states that it must sell its full holding in the business by the end of 2017.

But analysing progress, RBS said there is a significant risk that it will not meet this deadline.

“As a result of this analysis, we have concluded that there is a significant risk that the separation and divestment to which we are committed will not be achieved by 31 December 2017,” the bank said in a statement.

Complexities are making it difficult to create a banking system for the proposed new bank, RBS said. “Due to the complexities of Williams & Glyn’s customer and product mix, the programme to create a cloned banking platform continues to be very challenging and the timetable to achieve separation is uncertain,” it added.

The bank said it is looking at other ways to split the business and admitted that the cost of doing so will be higher than originally planned.

This is not the first time IT challenges have hindered the divestment. In 2011, Spanish bank Santander pulled out of a £1.7bn agreement to take over 316 RBS branches because of IT integration problems.

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Lloyds Banking Group was also forced to split its business, and TSB was formed under the codename Project Verde. TSB later launched alone with five million customers, eight million accounts, 8,000 staff and 632 branches.

Spanish bank Sabadell then acquired it for £1.7bn, with Lloyds contributing £450m to the cost of integrating TSB and Sabadell IT. TSB’s systems are now run by Lloyds through a managed service, but Sabadell is moving TSB IT systems to its own in-house core banking platform.

Separately, RBS reported a loss of almost £1bn for its first financial quarter of 2016. .................................................................................................

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