TSB Bank fined $59 mn over IT crash, in addition to paying £32.7 mn to customers

TSB Bank has been fined 48.65 million pounds ($59.1 million) over an IT upgrade in 2018 that resulted in significant disruption to TSB’s in-person, online and phone banking services.
IT network security issues
The IT upgrade at TSB Bank immediately experienced technical failures, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) said.

TSB has failed to organize and control the migration adequately, and failed to manage operational risks from its IT outsourcing setup. TSB did not reveal the name of its IT partner and whether the TSB Bank’s CIO was responsible for the mis-management of IT systems.

In April 2018, TSB updated its IT systems and migrated the data for its corporate and customer services on to a new IT platform. While the data itself migrated successfully, the platform experienced technical failures. This has resulted in significant disruption to the continuity of TSB’s banking services, including branch, telephone, online and mobile banking.

All of TSB’s branches and a significant proportion of its 5.2 million customers were affected by the initial issues. TSB returned to business-as-usual in December 2018. TSB already paid £32.7 million in redress to customers who suffered issues.

TSB’s Spanish owner Sabadell said in a statement that the settlement would be accounted for by TSB in the fourth quarter and estimated an impact of 6 basis points on the group’s capital. It said that TSB’s and Sabadell’s insurance policies would offset the impact in the following quarters, Reuters news report said.

Sabadell’s 1.7 billion pound acquisition of TSB in 2015 ran into issues more than four years ago when IT glitches sent costs spiraling.

“The failings in this case were widespread and serious which had a real impact on the day-to-day lives of a significant proportion of TSB’s customers, including those who were vulnerable,” said Mark Steward, executive director of enforcement and market oversight at the FCA.

TSB Bank was fined 29.75 million pounds by the FCA and 18.9 million pounds by the PRA, receiving a 30 percent discount by agreeing to settle the issue, the British regulators said in a news statement issued on Tuesday.

In a statement, TSB CEO Robin Bulloch apologized to consumers hit by problems during the upgrade.

“We worked hard to put things right for customers then and have since transformed our business,” he said. “Over the past four years, we have harnessed our technology to deliver new products and better services for TSB customers.”

The report of an investigation published in 2019 found that an IT crash at TSB bank disrupted services for nearly 2 million customers and halved parent Sabadell’s profits the previous year was caused by moving to a new banking platform before it had been properly tested.

The fine puts an end to the uncertainty that surrounded TSB in the past and which also forced Sabadell to freeze the sale of its British unit until it completely turned around the business.

In the third quarter, TSB made a positive contribution to the parent group’s results for the seventh consecutive quarter, adding 39 million euros ($41.4 million).