Bank IT failures ‘need more watchdog probing’

By Pádraig Hoare

The Central Bank must become more intrusive to ensure IT systems in Irish lenders are up to par, and it is no longer adequate to rely on assurances from the banks themselves.

That is according to Fianna Fáil finance spokesman Michael McGrath, as the watchdog said its monitoring of banking IT systems was robust enough.

It comes as the boss of UK lender TSB was hauled over the coals over his handling of an IT systems’ failure that saw thousands of customers locked out of their accounts and bills and direct debits going unpaid.

TSB said chief executive Paul Pester had the full support of the board as he was criticise by politicians over the crisis, who said they no longer had confidence in his ability to lead the bank.

The owner of TSB, Spanish banking group Sabadell, admitted the failure has cost it at least £70m (€79.6m) as it sought to restore confidence.

There have been a number of high-profile IT issues in Irish banking over the years, with Central Bank governor, Philip Lane saying a lack of investment in online systems was due to banks prioritising other areas following the financial crash of 2008.

The Central Bank said it took IT issues with banks very seriously.

“Customers of financial services firms have a legitimate expectation of high quality, uninterrupted services, whether provided through traditional or online channels. The Central Bank expects all firms to have adequate systems and controls in place and where issues that impact customers arise they should be addressed and rectified urgently, particularly as customers are increasingly using and becoming dependent on online and mobile banking services,” it said.

All errors must be resolved “speedily” and no later than six months after the date first discovered, the watchdog said, including correcting any systems failures; ensuring effective controls are implemented to prevent any recurrence of the identified error; refunds with appropriate interest to all consumers affected where possible; and notifying all affected consumers, both current and former, in a timely manner.

It pointed to its November 2014 settlement with Ulster Bank, which saw the lender fined €3.5m over governance and IT failings that resulted in 600,000 customers being deprived of essential and basic banking services over 28 days in June and July 2012.

Mr McGrath said when he asked as to what was being doing to ensure IT systems in banks were up to standard, the Central Bank said it had sought assurances from the lenders.

“We have to recognise how intrinsic IT systems are, and the risk of things going wrong is something that has to be given a greater level of priority. There have been examples of under-investment in IT and it is a concern across the financial sector.

“A sustained problem in one lender is very serious as there is so much interconnectivity today, that the problem reaches beyond just the bank. A more intrusive approach to assess IT is needed. It is no longer adequate to simply get assurances from banks, because we have seen far too many incidents,” he said.

A system failure by Ulster Bank in April that saw funds taken from customer accounts was initially thought to have been an IT glitch, but the bank has said it was fully down to “human error”.

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