The fallout from the IT systems meltdown at the Royal Bank of Scotland (RBS) in June that affected the ability of millions of NatWest and Ulster Bank customers to make and receive payments has led to MPs concluding that every bank should check its IT systems.
Andrew Tyrie, chairman of the Treasury Select Committee (TSC) said the systems failure threatened to shut down the entire UK banking system and impacted on businesses as well as consumers.
Mr Tyrie said: “It was not just RBS customers who suffered. The problems, and the confusion they caused, threatened to infect the rest of the banking system. For some, the consequences were very severe.”
Mr Tyrie reserved praise for Stephen Hester, chief executive of RBS for accepting full responsibility for the problems and attempting to fix the problem quickly and keep customers informed of their rights.
Mr Tyrie said: "This episode did little for public confidence in our banks. Mr Hester took swift action to remedy the failure; he also took full responsibility on behalf of RBS. He did the right thing.
“Those affected now need clear and straightforward information to enable them to seek redress.
"Every bank should be checking its IT systems. We need to have confidence that such a failure cannot happen again."
RBS ensured that many NatWest and Ulster Bank branches opened extended hours to allow customers an opportunity to get to a branch to sort out problems face to face.
RBS has set aside £125 million in its interim financial results for dealing with the glitch but has warned that the costs are likely to be even higher.
Mr Tyrie released details of an exchange of letters between the TSC, RBS and the Financial Services Authority (FSA). FSA Chairman Adair Turner said in a letter dated July 13th that the FSA would conduct its own investigation into the IT meltdown.
On July 6th, Mr Hester wrote that the cause of the IT failure was a routine software upgrade conducted at RBS’s HQ in Edinburgh. He said the issue was promptly fixed but it left a “significant backlog” of data processing, though no customer data was violated.
Mr Hester said: "Everyone at RBS is deeply frustrated by the scale of disruption experienced by our customers, and especially the time being taken to restore normal service at Ulster Bank."
In his letter Mr Hester confirmed that the IT failure affected the Government Banking Service systems which are used by wider public sector including HM Revenue and Customs.
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