A Spanish Owned British Bank

Banco Sabadell managers had a conference at Barcelona’s Palacio de Congressos de Cataluña for a day of backslapping and management gobbledegook in late 2017.

Banco Sabadell chief executive Jaime Guardiola gave his speech including a mention of TSB, the British bank that the Spanish conglomerate bought in March 2015 for £1.7 billion.

Jaime Guardiola had reason to feel positive about TSB as it was due to start the migration onto new systems and off the old Lloyds Bank systems for which they were paying more than a hundred million pounds per year to Lloyds.

The switchover would be to a new version of Banco Sabadell system – now called Proteo4UK.

“The integration of Proteo4UK is an unprecedented project in Europe, a project in which more than 1,000 professionals have participated’. In all, an estimated 2,500 years-worth of labour had been put into the project.

But when the transfer to the new systems happened, crippling problems and mistakes brought TSB to its knees as  nearly 2 million of TSB’s 5.4 million customers who use internet and mobile banking were left high and dry.

Problems

TSB’s systems were down for a long weekend in late April for the transfer and when they reopened the doors to customers, the problems became apparent. Customers started to complain they couldn’t access their online account or could get access but it wasn’t their information showing.  Mortgages had disappeared, unexpected costs appeared and money couldn’t be withdrawn.

Endless complaints on social media made it obvious to the world that the transfer was a disaster.

Strangely, Banco Sabadell, owners of TSB, seemed to have little indication that anything was wrong, as they issued a press release that morning announcing the successful completion of the TSB migration to new systems. Did they not bother to check on the actual status of the transfer first?

The reasons for the problems are still not clear and TSB has given out very little information on what actually went wrong. But the most likely conclusion is that the proper level of final testing had not taken place.

Thorough system testing is a very resource intensive process and hence is expensive and time-consuming. Did management not understand the risks of inadequate testing?

The IT staff will have tested as much as they were allowed to by the timescales and budgets and a change as monumental as this one should have been exhaustively tested as making fixes after Go Live is many times more difficult and expensive than during the testing phases.

TSB was in terrible trouble and turned to IBM for help. They brought in IBM experts to review the situation and propose remedies. They can review what happened and the management role but on the technical side it’s always very difficult for outsiders who are not used to a system to understand how it works and what could have gone wrong.

Two IT contractors who were involved in the transfer process, spoke to Reuters.  “There wasn’t time to test everything, digital and mobile payment testing weren’t properly scoped, so it wasn’t a surprise to me when it went live last week and those parts didn’t work,”

The Fallout

Even after the immediate problems are solved and the systems are fully operational again, TSB’s problems will only have begun as the regulators take a dim view of such treatment of customers and such poor preparation for a major change in their systems which then affect the customers.

TSB notified the Information Commissioner’s Office when it became clear that some customers were getting access to other customer’s data.

The Financial Conduct Authority and Prudential Regulation Authority will be investigating the impact that more than a week of chaos has had on TSB customers – and the FCA has the ability to impose unlimited fines.

The Bank promised it will waive overdraft fees and any associated charges for the month of April, and that current account customers will see an increase in interest rates for their money from three per cent to five per cent. Financial analysts estimate that’ll cost about £25 million.

When RBS had a major IT crash in 2012, the bank was fined £56m by the FCA and the Prudential Regulation Authority.

The Rights of TSB Customers

Customers affected by technical problems that prevent access to accounts can claim compensation for any losses incurred. That includes any charges for late payment, extra costs incurred such as credit card interest and any knock-on costs from not being able to make a payment.

If you have experienced any “knock on” consequences of not being able to pay your outgoing bills then you can put in a claim for your losses. The starting point should always be to put you back in the position that you would have been in had the error not occurred.

James Walker, founder of Resolver, (https://www.resolver.co.uk/) an online dispute resolution service, recommends customers keep the details of the payment, date and any charges they have incurred and make that part of their complaint.

If you’ve missed a payment like a mortgage or credit payment this may have been noted adversely by the credit rating agencies on your record. If so, you will need evidence from the bank that it was their fault so you can have that note removed.

If you wish to make a complaint, start with the TSB website. If you do not get the sort of response you’re looking for then you can escalate the complaint to the Financial Ombudsman. However, it can take up to 12 weeks to see an outcome.

Government

Nicky Morgan MP, chair of the Treasury Committee, said that apologies will not save the bank from the regulators.

Conclusion

At the time of writing of this article, most of the TSB systems were working but there were still a variety of problems such as cheque books being sent out with incorrect sort codes. TSB will be working for a long time to sort everything out and to learn the lessons of this debacle. The government is unlikely to let them off lightly as it seems the problems were entirely avoidable.

IT systems can be very expensive to get right, but not compared to the cost of doing it wrong.

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