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How management failings led to RBS IT catastrophe

Matthew Finnegan | Dec. 1, 2014
Was lack of IT investment to blame for the banks 2012 IT fiasco?

It is also attempting to reduce the number of core banking platforms by half in the next two years.

"In this year alone we have gone from a single overnight batch to now running four overnight separated batches on different parts of our business," said McEwan in a recent earnings call.

"That is one of the heaviest lifting I think any financial services organisation could do in their lives. And we have done that in the last 12 months and nobody noticed it. And at the same time we have double batched, we have doubled security, we've got a little bit of work to do on the ATM and the point-of-sale technology, fronts that we connect into, to do by the end of this year."

So is the FCA right?
So is the FCA correct to say that the outage was due to a lack of safeguards rather than investment in IT? It is likely that both aspects played a major role, said TechMarketView financial services analyst, Peter Roe, with the hugely complex and intertwined legacy systems used by the bank the real underlying cause.

While there were clearly huge amounts spent on IT each year, it was not necessarily targeted in the right place, he said.

"A huge amount of resource has been devoted to keeping the lights on, and also making systems compliant with all the new regulation, so there was little in the past that was able to be spent on real change," he said.

"[The batch processing software upgrade] is an example of how legacy systems increase the vulnerability of the banks, particularly when systems have to change, as they do.

"It was not a lack of investment - because of the amount that they were spending - but it shows the complexity of changing IT within a bank, [and the danger of] not having the correct process and quality control, because of the fiendishly complicated structures and systems."

He added: "It is a bit like a game of 'pick-up-sticks' - you try and pick one up without moving the other ones - but with software. If you move one system you are going to move others, and if you are not careful you can bring the whole lot of them down."

According to Lev Lesokhin, executive vice president at software quality analysis firm CAST, legacy infrastructure was ultimately to blame.

"The underlying issue is the creaking infrastructure which the largest (and oldest) UK banks use. This is under increasing pressure to deliver 'Google-like' customer services demanded by customers today," he said.

"Western banking systems are particularly exposed because they were the first to install computer systems, and investment in those systems has since been neglected as tightening budgets have meant less is spent on modernisation and quality assurance.

"Until these underlying issues are addressed and industry standards put in place, we will continue to see glitches like this."

Source: Computerworld UK


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