Financial Authorities Fine UK Bank Nearly $60m For Platform Migration Disaster

Regulators in the UK have fined TSB Bank a total of £48.6 million ($60 million) for a botched platform migration which in 2018 cost the financial services firm £200 million.

Failures in operational risk management and governance – including management of outsourcing risks – relating to the bank's IT upgrade program led to customers being unable to access banking services and some being able to see details of others' transactions.

A 262-page independent review [PDF] commissioned by TSB itself later concluded that there should have been stronger oversight of suppliers and also found there were 2,000 defects relating to testing at the time the system went live, with the board reportedly only told about 800.

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) found that TSB failed to organize and control the IT migration program adequately and the operational risks arising from its IT outsourcing arrangements with its critical third-party supplier.

TSB's IT failings were "widespread and serious," said Mark Steward, FCA executive director of enforcement and market oversight.

"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," he added.

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Sam Woods, deputy governor for prudential regulation and CEO of the PRA, said: "The disruption to continuity of service experienced by TSB during its IT migration fell below the standard we expect banks to meet."

TSB was fined £29.8 million ($36 million) by the FCA and £18.9 million ($23 million) by the PRA. Without the 30 percent discount resulting from cooperating with the authorities, the fines would have totaled £69.5 million ($84.5 million).

The April 2018 disaster was a result of its migration from IT systems belonging to Lloyds Banking Group, from which it split in 2013.

In July 2018, TSB admitted that the week-long meltdown and its aftermath cost it almost £200 million, contributing to a statutory loss before tax of £107.4 million ($130 million). The figure came on top of the migration cost of £318 million ($387 million).

The long-planned migration aimed to move data on 5 million-plus customers and 1.3 billion records to the new platform Proteo4UK, created by TSB and Sabis, the IT services arm of Sabadell Group, which owns TBS. The bank later hired IBM in a systems integrator role, paying it $1 billion to help it deal with the mess, recruited 1,800 people, and moved 700 existing staffers into customer-facing roles. ®