Finance watchdog investigates British bank TSB over IT failures

* CEO Pester comes under pressure for IT failings

* Lawmaker questions 'quality and accuracy' of CEO's remarks

* Bank has communicated poorly with affected customers -FCA (Adds details of frauds, CEO quote)

By Lawrence White and Emma Rumney

LONDON, June 6 (Reuters) - Politicians criticised TSB boss Paul Pester's handling of the British bank's ongoing IT problems on Wednesday and the Financial Conduct Authority (FCA) said it was investigating the bank's response.

TSB, owned since 2015 by Spanish bank Sabadell, saw thousands of users locked out of their accounts last month and a surge in accounts hit by fraud after a botched migration of its computer systems.

There has been 2,200 fraud attempts and around 1,300 customers have lost money, Pester told the influential cross-party Treasury Select Committee on Wednesday.

"This was an unprecedented attack across UK banking by organised crime," Pester said, after apologising for the problems.

The regulator and lawmakers heaped pressure on Pester over his reaction to the crisis, raising questions about whether he may have to resign.

The FCA has the power to fine or ban executives that breach its rules.

TSB Chairman Richard Meddings said the bank will publish its own review into what happened, being conducted by law firm Slaughter & May.

"Where there is culpability we will act on it," he said.

POOR COMMUNICATION

Since the systems outage, TSB has made overly optimistic claims about how many customers were affected and has done a poor job of communicating with customers, the FCA's Chief (Taiwan OTC: 3345.TWO - news) Executive Andrew Bailey told the Committee.

Nicky Morgan, chair of the Committee, said: "I am deeply concerned by TSB's poor communications about the scale and nature of the problems it has faced; by its response to customer fraud; and by the quality and accuracy of the oral and written evidence provided by Dr Pester."

Pester, a former management consultant with a degree in theoretical physics from Oxford University, previously worked at Lloyds Banking Group on a project to separate TSB from its previous owner Lloyds in 2014.

Pester was criticised by members of the Treasury Committee when he first appeared before them on May 2.

On Wednesday he faced scrutiny over his claims at that prior hearing that most problems had been resolved, while some customers were waiting for hours in vain on helplines.

Pester said he had been unaware of those problems at the time.

"There were serious problems with the fraud line of your bank, for which you are accountable, and you didn't know about it?", Labour politician Alison McGovern asked Pester.

"Yes," he said.

(Additional reporting by Huw Jones, Editing by Jane Merriman and Elaine Hardcastle)