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RBS CEO blames innovation for IT disaster

Admits more focus was needed on refreshing existing systems

RBS chief executive Stephen Hester has said that the banking group may have avoided the major IT glitch a few weeks ago if it had focused more on keeping its existing systems up-to-date, rather than developing new systems.

Last month, millions of RBS, Natwest and Ulster Bank customers couldn't gain access to funds in their bank accounts after a botched upgrade that was made to batch processing software CA 7 from CA Technologies. Natwest customers were then hit by fresh online banking problems just last week.

"RBS has seen a big mushrooming in spending on technology. With hindsight maybe a bit more of that increase in spend should have been in the core, taken-for-granted systems that work every day.

"Some of our focus was on the new things people want," Hester told the Guardian in an interview.

His comments come as City regulator the Financial Services Authority prepares to tell UK banks to upgrade their outdated IT systems in light of RBS' failure.

Furthermore, Hester confirmed that the Financial Services Authority was in the process of investigating RBS over the LIBOR-fixing scandal that has already led to massive fines for Barclays.

"RBS is one of the banks tied up in LIBOR. We'll have our day in that particular spotlight as well," he said.

It was revealed that it was RBS' Edinburgh-based IT staff that were responsible for the systems failure last month, which contradicted earlier media reports that claimed a junior IT worker based in India had made the error.

Some customers of Ulster Bank, a subsidiary of RBS' in Ireland, were still experiencing problems over a month after the failure occurred.


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