TSB is fined £50m over IT meltdown that left millions locked out of their accounts

TSB has been fined nearly £50million over an IT meltdown that left millions of customers locked out of their accounts and struggling to access basic banking services.

The lender was handed a £29.8million penalty by the Financial Conduct Authority (FCA) and an £18.9million sanction by the Bank of England’s Prudential Regulation Authority (PRA) – a total of £48.7million.

That came on top of the £32.7million it has already paid in redress to customers affected by the disaster in 2018, which saw the company branded the Totally Shambolic Bank by this newspaper.

The regulators found a ‘significant proportion’ of TSB’s 5.2m customers were hit when the bank – which was bought by Spain’s Sabadell in 2015 – tried to move its online systems off the platform of its former owner Lloyds Banking Group onto a new service.

When the migration occurred in April 2018, customers found payments did not go through, they could not log in to their online accounts, telephone lines were overwhelmed by calls, and identification systems in branches crashed. 

Around 40 customers were even able to see details of other’s finances – typically relatives – when they logged into their online banking accounts.

One couple feared they would have to cancel their wedding as they were left unable to pay more than £2000 in bills just days before the ceremony. 

The FCA and the PRA acknowledged that the migration of TSB’s IT systems was ‘ambitious and complex’.

But TSB ‘failed to organise and control’ the programme and ‘failed to manage the operational risks’ which flowed from its outsourcing arrangements.

Mark Steward, the FCA’s executive director of enforcement and market oversight, said: ‘The failings in this case were widespread and serious which had a real impact on the day-to-day lives of a significant proportion of TSB’s customers, including those who were vulnerable.

‘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 control its affairs responsibly and effectively, with adequate risk management systems.’

A surge in attacks by scammers in the wake of the scandal meant 2200 customers suffered fraudulent attempts to access their accounts. 

Consumer rights group Which? said the meltdown caused ‘huge misery and inconvenience for customers, many of whom were left locked out of their accounts altogether and unable to pay bills or run businesses’.

Jenny Ross, money editor at Which?, added: ‘It’s encouraging that the regulator has taken strong action today, sending a clear message that damaging IT glitches will not be tolerated.’

The IT catastrophe sent TSB reeling. Just months later, chief executive Paul Pester left the bank.

A report by law firm Slaughter & May found that TSB’s board lacked ‘common sense’ and bosses made ‘ill-judged’ assessments about the bank’s readiness to go live with its new systems.

TSB tried to move on from the debacle when it appointed Debbie Crosbie as chief executive in 2019. She has since joined Nationwide, and has been replaced by Robin Bulloch.

But the lender has struggled to rebuild its reputation. Four years later, its customer numbers are still hovering around 5.2m. 

And just last year, plans for Sabadell to sell TSB to rival Santander fell through after the parties were unable to agree on a price.

Bulloch said: ‘We’d like to apologise again to TSB customers who were impacted by issues following the technology migration in 2018. 

We worked hard to put things right then and have since transformed our business. Over the past four years, we have harnessed our technology to deliver new products and better services for TSB customers.’