Frequency of bank IT crashes ‘unacceptable’ | Gladstone Brookes

Frequency of bank IT crashes ‘unacceptable’

Frequency of bank IT crashes ‘unacceptable’

A powerful Commons committee has condemned the frequency of UK bank IT crashes as ‘unacceptable’.

A report from the Treasury Select Committee expressed concern about the way in which online banking is performing in Britain.

Disruption

It said the frequency of customer disruption and the level of IT failures could lead to more regulation of the industry and financial levies being imposed.

The committee suggested that Britain’s three main financial regulators – the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Bank Of England – don’t have enough staff and experience to deal with the growing number of failures.

Solution

It suggested a possible solution to the dilemma could be a financial levy on the banks to ensure the regulators are ‘adequately funded and resourced’.

Committee members are also worried about the use of third party suppliers of cloud services for computing power and data storage.

Consequences

The report highlighted: “The consequences of a major operational incident at a large cloud service provider – such as Microsoft, Google or Amazon – could be significant. There is, therefore, a considerable case for the regulation of these cloud service providers to ensure high standards of operational resilience.”

It added that use of cloud services ‘stood out as a source of systemic risk’ for the whole financial system.

Unacceptable

Committee member Steve Baker commented: “The number of IT failures that have occurred in the financial services sector, including TSB, Visa and Barclays, and the harm caused to consumers is unacceptable.

“The committee, therefore, launched this inquiry to look ‘under the bonnet’ at what’s causing the proliferation of such incidents, and what the regulators can do to prevent and mitigate their impacts.

Hollow words

“For too long, financial institutions issue hollow words after their systems have failed, which is of no help to customers left cashless and cut off.”

The inquiry saw the lack of consistent and accurate recording of data on IT incidents as a problem and said that if future incidents occurred and went ‘without sanction’ Parliament should consider whether the regulators’ enforcement powers are fit for purpose.

TSB failure

The highest profile case in April 2018 was the TSB failure which left 1.9 million people unable to access online banking services for weeks because a transfer of data from one system to another went catastrophically wrong.

Now the committee are demanding the outcome of the regulators’ investigations as soon as possible.

Inquiry

Said Mr Baker: “For too long, we have waited for a comprehensive account of what happened during the TSB IT failure. Our inquiry into service disruption at TSB remains open.”

Stephen Jones, chief executive of the financial services trade body UK Finance, said the industry was spending billions of pounds on upgrades to make sure their systems are robust and secure.

Around the clock

He said: “When incidents do occur, firms work around the clock to minimise disruption and get services back up and running as quickly as possible.

“The industry conducts sector-wide exercises with regulators to ensure it is prepared to respond effectively to any major disruptions or events as part of its continued commitment to maintaining the resilience of the financial system.”

He added that the financial services sector is working to improve co-ordination with the regulators, but said it is important ‘to avoid overlapped or rushed mandatory change programmes that impact firms’ ability to protect their customers’

Struggling

Which? Money editor Jenny Ross commented: “Daily IT glitches are leaving too many people struggling to pay bills or buy everyday essentials.

“Regulators must swiftly address the committee’s concerns, and the government must introduce legislation that guarantees consumers can access and pay with cash for as long as it is needed.”

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