Here at FreedomNews, we know that IT outages and failures can be a cardinal business sin. UK regulator the Financial Conduct Authority (FCA) also appears to think so, as it is proposing the introduction of a bonus penalty in such cases if banks do not introduce one themselves.

The FCA’s head Andrew Bailey told the Commons Treasury committee: ‘We expect banks’ policies on variable remuneration to reflect operational resilience. They have to – if they don’t, we will act.’

FCA recorded 600 outages in a year

That ‘operational resilience’ includes the ability to avoid catastrophic IT failures and minimise the impact when issues do arise. The FCA has expressed concern over the number of such incidents in recent years. A report published by the regulator last November found that the FCA had received 600 reports of outages between October 2017 and September 2018. This represented an increase of 138% compared to the preceding 12-month period.

The most common cause for these outages was failed IT switchovers. Banks are being forced to adopt increasingly large and sophisticated IT systems as the way that we bank changes and fintech developments continue to roll out. Challenger banks and competing financial services are often early adopters of new technologies, but traditional banks are forced to keep up and frequently have to update or change legacy systems.

One of the most prominent examples was when TSB migrated millions of customer accounts from the old Lloyds Bank systems to a new core platform with its current owner Sabadell. As a result of IT failures, many customers were locked out of their accounts. Some had funds disappear and others were even able to access other people’s accounts.

This could cause banks to think differently

One senior IT professional, who preferred to remain anonymous, told Computer Weekly that hitting management and senior players from all departments in the pocket could have the desired effect.

He said: ‘A lot of the IT problems have been because management pushes IT to go ahead with releases of technology that is not ready. If the entire bank, and not just IT, is affected by problems by losing money, they will think differently in the future.

‘For example, traders will push IT to fix things and, if they are pressured, they might not be done properly and will cause problems later.