RBS Fined £56m For IT Meltdown Chaos In 2012

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

News of the penalties, revealed by Sky News on Wednesday 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."

The problems started in June 2012 and meant the banks' customers could not use online banking facilities or get accurate account balances from cash machines.

It also meant customers could not make mortgage payments, workers were not paid and travellers were left without cash in foreign countries.

They also forced a defendant granted bail by a court to spend the weekend in prison because it was unclear whether his bail payment had been made.

Among other problems, the banks applied incorrect credit and debit interest to customers' accounts and made inaccurate bank statements.

The IT problems stemmed from a botched upgrade to software that processed updates to customers' accounts overnight.

The fines marked the first time 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 has confirmed it 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."