Ex-CIO must pay £81k over Total Shambles Bank migration
Yes, the week-long IT meltdown that sparked a multitude of sarcastic Reg headlines
TSB's chief information officer during the British bank's incredible week-long 2018 meltdown didn't check the key supplier responsible for the migration was prepared to push the button before he assured the board that it was, regulators found yesterday.
The Bank of England's Prudential Regulation Authority (PRA) fined Carlos Abarca £81,000 ($101,000) after making its decision.
Abarca is the only exec to be singled out in the debacle, although the bank has already coughed up a total of £48.6 million ($60 million) for the botched platform migration, which is estimated to have cost the company £200 million and CEO Paul Pester his job.
In December, the bank was fined for failures in operational risk management and governance by both the Financial Conduct Authority (FCA) and the PRA. TSB's IT failings were "widespread and serious," said Mark Steward, FCA exec chief of enforcement, at the time.
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The botched move happened around five years ago, when TSB hauled all of its customers off the Lloyds Banking Group's IT platform and onto new owner Sabadell's equivalent, Proteo4UK, in April 2018. The migration left 1.9 million customers unable to view their accounts, some of whom had money disappear, couldn't pay their bills, or were able to view other people's accounts.
Sabadell Information Systems Limited, or Sabis, Sabadell's IT arm, was the prime contractor for the program, although the PRA referred to it in much of the documentation as the "third party" because TSB had an outsourcing relationship with Sabis UK that the PRA said Abarca was responsible for, along with "TSB's operational relationships with third parties in relation to IT."
TSB had previously split from Lloyds Banking Group in 2013 and was sold to Sabadell in 2015 for £1.7 billion.
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The bank ultimately had to bring IBM on board to fix the problems.
The PRA said Abarca broke Senior Manager Conduct Rule 2 when he "failed to take reasonable steps to ensure that TSB adequately managed and supervised appropriately its outsourcing arrangement in relation to its 2018 IT migration programme."
It said that:
In particular, Mr Abarca did not:
- ensure that the third party's ability and capacity were adequately reassessed on an ongoing basis;
- ensure that TSB obtained sufficient assurance from the third party in relation to its readiness to operate the new IT platform; and
- give sufficient consideration to whether further investigation was required before giving assurance to the TSB Board as to the third party's readiness for migration.
Sam Woods, PRA CEO, said: "Senior managers have an essential role to play in ensuring that firms manage and supervise outsourcing effectively. In this case, the PRA has fined Mr Abarca because his management of a key outsourcing relationship fell below the standard we expect."
The Bank of England elaborated in its final notice to Abarca [PDF]:
The Main Migration Event took place over the weekend of 20 to 22 April 2018, and almost immediately TSB encountered serious and well publicised issues, including failures with online, telephone and mobile banking services, branch technology failures, and consequential issues with payment and debit card transactions (albeit the underlying payment systems were themselves functional)... Whilst the data migration itself was successful, the Migration Incident resulted in a significant disruption to the continuity of TSB’s provision of core banking functions (including branch, telephone, online and mobile banking) immediately post migration, with some more limited issues persisting for a sustained period of months, impacting all 550 of its branches and a significant proportion of its customers...
The ex-CIO agreed to settle during the discount stage of the PRA investigation, and so qualified for a 30 percent settlement discount, meaning he paid £81,000 instead of the £116,600 he would otherwise have paid. ®