TSB fined £48 million over botched migration

City regulators have fined TSB £48.65m for “widespread and serious,” failings related to a disastrous IT upgrade in 2018 which left millions of banking customers locked out of their accounts for weeks, and problems with payments persisting for months.

The £48.65m fine was for levied for "operational risk management and governance failures," and concludes an investigation by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) which has taken the best part of five years. The investigators stated that TSB failed to properly "organise and control" the IT migration programme, and also that TSB failed in its duty to control the risks involved in the contracts with a critical third party involved in the migration process.

The expensive episode was linked to TSB's decision to move approximately 5 million customers customers to a new IT system in Spring 2018 as part of its separation from Lloyds. Whilst the data itself was migrated successfully, customers immediately began to report difficulties accessing accounts from phone, online and mobile platforms, and even in branches. The difficulties persisted for weeks, with some customers still reporting issues in December 2018.

One huge mistake that TSB made during the crisis was to try to downplay it initially by acknowledging intermittent issues with the customer phone and mobile apps but stating that only a limited number of users were affected. Twitter begged to differ and a full blown crisis was born. That mistake earned a rebuke from Andrew Bailey, now Governer of the Bank of England, but Chief Executive of the FCA at the time. Bailey said that the bank failed to be "open and transparent," about the scale of the technical problems they faced.

TSB Chief Executive Paul Pester admitted a few days later that the company was "on its knees,"and that he had drafted in a team of experts from IBM to try to resolve the issues. The chaos endured for months, with Pester being summoned to a Treasury Select Committee hearing.

Pester stepped down in September, but it took until December 2018 for TSB to return to a businesses-as-usual, and the bank has already paid out £32.7m to compensate customers.

Mark Steward, FCA Executive Director of Enforcement and Market Oversight 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.

'The firm failed to plan for the IT migration properly, the governance of the project was insufficiently robust and the firm failed to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.'

Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:

'The PRA expects firms to manage their operational resilience as well as their financial resilience. The disruption to continuity of service experienced by TSB during its IT migration fell below the standard we expect banks to meet.'