Bank Lacks Robust Crisis Management - Report

A failure of the Bank of England's interbank payments system last year showed it was not fully able to handle a crisis in the financial system, a report has found.

The Real Time Gross Settlement (RTGS) system went down for nine hours on 20 October leaving almost £300bn of payments, including house purchase transfers as well as financial market trades, in limbo.

The failure was blamed on "the introduction of defects as part of functionality changes made to the RTGS system in April 2013 and May 2014", the report said.

The investigation, which was commissioned by the Bank and compiled by auditors Deloitte, said that while all the cash transfers affected eventually cleared that day, a third of the house purchases were delayed by at least 24 hours.

It identified a lack of robust crisis management at the bank - a finding that will be seen as particularly embarrassing because of the central bank's own demand of UK lenders that they should ensure financial stability through robust IT systems.

The report also highlighted a lack of supervision at the time of the outage.

It showed that three senior staff were abroad and did not see an email warning them of the problem and officials chose not to start a backup system in the hope of fixing the immediate problem quickly.

The Bank said it was to implement all the report's recommendations and it had since launched a committee to oversee the system.

It is being led by Minouche Shafik, the deputy governor for markets and banking.

He said: "The RTGS system is vital to the effective functioning of the UK economy and the financial system.

"Participants in the RTGS system - and most importantly, their customers - rightly expect it to meet extremely high standards of service, availability and resilience.

"The Bank is committed to meeting those high expectations, including through the full and timely implementation of the recommendations contained in this independent review."