Royal Bank of Scotland's computer failings posed a threat to the entire British banking system, MPs warned in a series of letters sent to the Financial Services Authority (FSA).
The Treasury Committee has today published the string of communications between its chair Andrew Tyrie and the regulator in which it outlined its stance on the Royal Bank of Scotland's (RBS) IT glitch which affected millions of its customers across the UK and Ireland.
The failings in June hit NatWest and Ulster Bank clients as well as those of parent group RBS. They also forced RBS to set aside £125 million to compensate customers, following a stretch in which it reported a half-year loss of £1.5 billion, versus a £794 million loss the year before.
The Treasury Committee said the failings were not only to the detriment of clients, but to businesses and the rest of the banking system.
Tyrie said: ‘The recent IT failure at RBS Group affected millions of individuals and a wide range of businesses in the UK and Ireland.
‘It was not just RBS customers who suffered. The problems, and the confusion they caused, threatened to infect the rest of the banking system. For some, the consequences were very severe.’
The failings meant that retail and corporate customers were unable to obtain access to funds and payment facilities - access which Tyrie emphasised is crucial.
‘This episode, and the initial confusion surrounding it, did little for public confidence in our banks,’ he said.
However Tyrie lauded RBS’s chief executive Stephen Hester for his ‘swift action’ to remedy the failing, and for accepting full responsibility on behalf of RBS.
Tyrie said: ‘He did the right thing. Those affected now need clear and straightforward information to enable them to seek redress.’
The Treasury Committee will want to look closely at RBS’ financial report when it is published to ensure that any systemic weaknesses and governance issues are ‘adequately addressed’, by both the bank and FSA, Tyrie added.
‘Every bank should be checking its IT systems. We need to have confidence that such a failure cannot happen again.’
At the time of the failing Tyrie said the glitch and its consequences were ‘unacceptable’ and decided to write to Hester as well as the FSA’s chairman Lord Turner demanding an explanation for what had happened.
The failings came shortly after the banking industry was dealt a blow through the revelation of Barclays’ Libor-rigging, which saw its chairman Marcus Agius and chief executive Bob Diamond resign.