Royal Bank of Scotland Group Plc (RBS) will pay an $88 million fine to Britain’s Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority for the 2012 computer system failure that left millions of customers without account access for weeks. Some 6.5 million customers, which is about 10% of the U.K. population, were impacted.
According to FCA enforcement head Tracey McDermott, the technical glitch happened because of RBS Groups’ failure to identify and handle the risks that can occur from IT incidents. The failure, he noted, exposed customers to the risks.
The system failure happened after a third-party contractor installed a software upgrade. Because of the collapse, bank customers, as well as those in its Ulster Bank and NatWest divisions were unable to take out, transfer, or withdraw funds.
RBS said it would invest a significant amount of money to enhance its computer system. Following the 2012 incident, the banks says it performed a complete accountability review, reduced compensation of 16 individuals that affected their bonuses and outstanding unvested awards, as well as lowered the bonuses of the division tasked with overseeing the IT services.
By settling early, RBS received a 30% discount off the fine from regulators. This is the first fine that the PRA has levied since it was established last year. The regulator is tasked with overseeing the stability of Britain’s financial system. PRA said RBS’s technology failure could have adversely impacted the nation’s banking system because it interfered with core operations of lenders, as well as affected third parties.
RBS has paid over 70 million pounds to customers, other individuals, and companies for the system failure.
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RBS Fined $88 Million by U.K. Regulators for IT Failures, Bloomberg, November 20, 2014
Prudential Regulation Authority
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