UK banks struggling to improve 'antiquated' IT systems, says regulator

Matthew Finnegan

UK and Northern Ireland banks are a long way from making "antiquated" IT systems more robust, a senior member of the Prudential Regulation Authority has claimed.

Sam Woods, PRA director for UK banks, was responding to questions relating to the Royal Bank of Scotland (RBS) IT failure in June 2012 at a Northern Ireland Affairs Committee meeting.

Woods said that the PRA was continuing its investigations into the RBS outage, and had subsequently approached other major UK banks to conduct assessments of their IT systems. The PRA uncovered a "number of deficiencies", he said, with many struggling to improve "antiquated" IT systems.

"Despite our progress, I feel that we are a very long way from being able to sit here with confidence and say UK and Northern Ireland systems are robust," said Woods.

The Financial Conduct Authority, set up to monitor bank behaviour as part of the new 'twin peaks' regulation, is also currently conducting its own investigation into the RBS IT outage. However Woods added that the PRA, which is focused more on the financial stability of companies, was taking a close interest because the "collapse of IT systems, particularly on that scale, has the potential to form a threat to the safety and soundness of firms".

Millions of RBS, Natwest and Ulster Banks customers were unable to access their accounts for weeks after a botched upgrade to batch processing software at the bank's Edinburgh data centre affected ATMs, online banking and branch systems. The IT failure is believed to have cost the bank approximately £175 million.

However, Woods said that despite the challenges faced by banks in improving IT systems, a remedial action programme put in place by RBS, known as Project Atlas, had helped to ensure that a recurrence of IT problems seen in late 2013 "did not escalate into the same level of issue" as that of the previous year.

In a statement regarding the December outage RBS CEO pledged to spend more on IT systems in the future, as the bank had "failed to invest properly in its systems" for decades.