RBS Fined £56m For IT Meldown Chaos In 2012

RBS (LSE: RBS.L - news) has been fined £56m for failures linked to an IT meldown two years ago that left customers without access to their money.

News of the penalties, revealed by Sky News last night , was confirmed by the Financial Conduct Authority (FCA) and the Bank of England's Prudential Regulation Authority (PRA) after accounts were crippled across the group at NatWest, RBS and Ulster Bank.

The FCA's fine made up the bulk of the total at £42m.

The regulator said: "The FCA has taken this action against the banks for failing to put in place resilient IT systems which could withstand, or minimise the risk of, IT failures.

"The actual cause of the IT incident was a software compatibility problem with the underlying cause being the banks’ failure to put in place adequate systems and controls to identify and manage their exposure to IT risks.

"The IT failure affected over 6.5 million customers in the United Kingdom for several weeks.

"Over the course of that period customers could not use online banking facilities to access their accounts or obtain accurate account balances from ATMs; customers were unable to make timely mortgage payments; customers were left without cash in foreign countries; the Banks applied incorrect credit and debit interest to customers’ accounts and produced inaccurate bank statements; and some organisations were unable to meet their payroll commitments or finalise their audited accounts."

The fines marked the first occasion on which the PRA, which has a duty to maintain financial stability, has hit a regulated firm in the pocket since it was established last year.

RBS had already made a provision in its accounts of £175m to reimburse customers who had suffered losses and confirmed today it had paid out almost £71m in redress.

The Central Bank of Ireland (Other OTC: IRLD - news) fined Ulster Bank around £3m earlier this month for the IT failure, which prompted the FCA to announce earlier this year that it would tackle the robustness of banks' IT systems as one of its priorities.

Last December, RBS suffered another systems outage on the busiest online shopping day of the year, the third time in about 18 months that such a problem had prevented customers from using cards, cash machines and online banking services.

Other banks have also been hit by IT problems which have affected customer-facing services on a regular basis.

RBS has since pledged to invest more than £1bn in its digital capabilities and IT systems during the next three years.

Sir Philip Hampton, chairman of RBS, said: "Our IT failure in the summer of 2012 revealed unacceptable weaknesses in our systems and caused significant stress for many of our customers.

"As I did back then, I again want to apologise to all customers in the UK and Ireland that we let down two and a half years ago.

"I am confident that the progress we have made - in increasing the resilience of our IT systems through the additional investment of hundreds of millions of pounds and the enhancement of our control structures - has made RBS better able to provide the service our customers expect and deserve.

"I am also pleased that the regulator acknowledged the steps we took at the time to provide redress to anyone who had lost out as a result of our mistakes."