Royal Bank of Scotland Group PLC, 81% owned by the British government, is faced with a fine worth tens of millions of pounds for a big IT breakdown that left customers without access to their banking accounts.
RBS could be fined with as much as £50 million by the Financial Conduct Authority over its IT meltdown two years ago, according to people familiar with the matter. The system failure in June 2012 were due to a technology update that glitched and within only few days led to a backlog of 100 million unprocessed payments in RBS, and its NatWest and Ulster Bank units.
The penalty will further hurt RBSs reputation, which took a big hit last week when the lender was fined by FCA and the Commodity Futures Trading Commission for its involvement in manipulating the currency market. The bank paid a total of £400 million over the failure of internal controls which allowed traders to act together to move currency prices for profit.
Bank of America, JPMorgan, Citi, USB and HSBC were also fined by financial officials, bringing the total amount of the penalty above $4 billion. However, Barclays pulled out of the settlement at the last minute and said it would “seek a more general coordinated settlement” with other regulators and authorities.
Last year, the FCA launched an investigation into the meltdown, which led to the banks £175 million provision to compensate affected customers and another £450 million on improving IT systems. Stephen Hester, CEO at the them, dropped his yearly bonus in an attempt to calm consumers down.
RBS and FCA wouldnt comment on details around the potential fine, but the bank said last month the regulator begun “enforcement proceedings” related to its investigation.
Last year, RBS was affected by another big IT breakdown on “Cyber Monday”, the busiest shopping day in December. The meltdown left customers unable to to access their credit and debit cards for three hours. Back then the bank admitted its computer systems were not funded well enough.
However, RBS and NatWest promised to spend around £1 billion on IT upgrades over the next three years as a part of the initiative “bank on the move”.
Royal Bank of Scotland Group PLC gained 0.75% on Friday and closed at GBX 376.60 in London. On Monday the stock edged up 0.43% to trade at GBX 378.23 at 12:50 GMT, marking a one-year increase of 14.61%. The company is valued at £43.10 billion. According to the Financial Times, the 24 analysts offering 12-month price targets for Royal Bank of Scotland Group PLC have a median target of GBX 370.00, with a high estimate of GBX 500.00 and a low estimate of GBX 250.00. The median estimate represents a 1.75% decrease from the last close price of GBX 376.60.
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