Ulster Bank has been fined €3.5m (£2.75m) for IT failings in 2012 that left 600,000 customers unable to access key banking services for 28 days.
The incident occurred across June and July in 2012 when a software update applied to the bank's systems – which are owned and maintained by Ulster Bank's parent company, the Royal Bank of Scotland – halted transactions.
The glitch took several weeks to fully rectify, leaving thousands of customers unable to make or receive payments. To date Ulster Bank says it has paid back €59m in compensation to customers affected by the incident.
Now the Central Bank of Ireland (CBI) has issued its fine due to the IT and governance failings at the bank, which must be paid on top of the money already spent on compensation.
The Central Bank’s director of enforcement, Derville Rowland, said the fine should serve as a warning that outsourcing IT is not an excuse if anything goes wrong.
"As the provision of financial services to customers represents the core business function of [Ulster Bank], the major breakdown in the firm’s provision of these services as a result of IT failings is completely unacceptable,” he said.
"While the Central Bank recognises that IT outsourcing is a feature of modern banking business, outsourcing is no defence for regulatory failings. Ultimate accountability for compliance remains with firms and they must ensure that they maintain oversight of outsourced activities."
Ulster Bank chief executive Jim Brown said the bank accepted the findings and the fine from the CBI and had worked to put new processes in place that should ensure such a situation does not occur again.
"We accept the CBI’s finding that our governance arrangements and controls over our outsourced IT arrangements to RBS were not sufficiently robust and that this led to a prolonged failure which caused significant inconvenience to our customers," he said.
"We have put in place an enhanced operational risk framework, significantly enhancing our capability in this area and improved our way of working with RBS to ensure that we are better placed to support our customers."
Brown said one way in which the bank aims to avoid a repeat incident is by creating a "dedicated separate batch scheduler" for Ulster Bank so if a problem does occur not all banking businesses are affected.
The fine comes amid reports the Financial Conduct Authority (FCA) is preparing to levy its own fine against RBS over the IT outage that locked customers out of their accounts.
The bank has already paid £175m in compensation payments due to the incident and is in line to face many more millions in fines.
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