The independent investigation by the UK banking regulator into the computer failures at Royal Bank of Scotland will examine why it took longer to resolve problems at its Irish subsidiary Ulster Bank.
The chairman of the Financial Services Authority, Adair Turner, said it has told RBS it wants “a separate full review to be undertaken by an independent skilled person to established what went wrong and why”.
The FSA informed the UK parliamentary treasury committee in a letter sent on July 13th – but only published yesterday on the committee’s website – that RBS must provide “an assessment of the consequences and the subsequent management of the IT failure”.
“This will include understanding why it took longer to resolve the Ulster Bank position,” Lord Turner told Andrew Tyrie MP, chairman of the treasury committee at the House of Commons.
The accounts of RBS and its subsidiary NatWest were back to normal within days of the computer crash, while it took more than a month for the problems at Ulster Bank to be fully resolved.
Lord Adair said that “the exact root cause” of the computer error at RBS “requires investigation”.
“On receipt of the independent review, we will consider whether further regulatory action is required,” he said in the letter.
The technological failure at RBS prompted the FSA to send letters to the UK’s nine largest banks and building societies, reminding them of regulatory obligations. The FSA demanded the names of senior managers who could be held personally responsible if information technology systems go awry.
The letters were addressed to the chairmen of the financial institutions reflecting the seriousness with which the FSA is taking the matter given that it normally writes to chief executives about regulatory issues.
Lord Turner told the committee in his July 13th letter that the FSA had been “liaising closely” with the Central Bank, Ulster Bank’s regulator, since the computer glitch was discovered on June 20th.
“For Ulster Bank, significant progress has now been achieved in returning customer accounts to normality, though further work will still be required to deal with residual issues still affecting some payment channels,” he said.
Accountancy firm PricewaterhouseCoopers will lead the FSA’s review into RBS, Britain’s largest taxpayer-owned bank, it was reported yesterday.
UK law firm Clifford Chance is leading RBS’s internal investigation of the computer error.
Ulster Bank announced a compensation package last week for more than 600,000 customers who could not access funds in the accounts and suffered delayed payments during June and July.
The bank has set aside €35 million to cover the compensation but Ulster Bank chief executive Jim Brown has said the final figure would cost the bank “tens of millions of euro more than that”.
The problem was caused by a software upgrade applied at a transaction processing centre run by RBS in Edinburgh in mid-June.
(Additional reporting – Financial Times, Bloomberg)
