UK bank TSB fined nearly £49m over IT system meltdown

British bank TSB has been fined close to £49m over an IT meltdown in 2018 that left customers locked out of online banking accounts for several weeks.

The UK’s financial regulator, the Financial Conduct Authority (FCA), and Bank of England’s Prudential Regulation Authority (PRA) are said to have found “widespread” deficiencies in the planning and execution of a customer data migration in April 2018 that caused the disruption.

Branch, telephone, and online banking were all affected by the “botched” migration, and the problems were not fully resolved for eight months.

“A significant proportion of its 5.2 million customers were affected by the initial issues”, the FCA said.

At the time, TSB had been attempting to shift data from its previous parent bank, Lloyd’s Banking Group’s, system to a new one managed by its current Spanish owner, Sabadell.

The move proved defective with many customers unable to access their accounts and some customers being able to see the confidential records of others.

The FCA said that whilst the data itself was transferred successfully, the IT platform “immediately experienced technical failures”.

The regulators said: “TSB’s IT migration programme was an ambitious and complex IT change management programme carrying a high level of operational risk.”

“Its success was critical to TSB’s ability to provide continuity of critical functions and safety and soundness.”

“However, the regulators’ found that TSB failed to organise and control the IT migration programme adequately, and it failed to manage the operational risks arising from its IT outsourcing arrangements with its critical third-party supplier.”

Mark Steward, executive director of enforcement and mark oversight at the FCA, said: “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.”

According to the FCA, TSB paid $32.7m in compensation to customers affected by the problems.

TSB chief executive Robin Bulloch said: “We’d like to apologise again to TSB customers who were impacted by issues following the technology migration in 2018.”

“We worked hard to put things right for customers then and have since transformed our business.”

TSB was fined £29.75m penalty from the FCA and a fine of £18.9m from the PRA.

The flawed IT upgrade cost the bank £330m, TSB admitted in 2019, and about 80,000 customers moved their accounts away from the bank in 2018. It also pushed it’s-then chief executive, Paul Pester, to resign.