Summary: MPs hit out at TSB compensation offers as fraud hits customers
TSB bosses faced another bruising session in front of the Treasury select committee as they were quizzed about the continuing IT meltdown which hit 1.9m of its customers.
Chief executive Paul Pester said 2,200 customers had suffered fraudulent attempts to access their accounts since the IT problems first surfaced. Of these 1,300 had received compensation.
Earlier FCA boss Andrew Bailey mentioned a figure of 10,600 incidents, but Pester clarified that the figure referred to alerts sent to accounts when suspicious activity was detected by the bank’s systems.
Pester said the bank had set up a dedicated fraud line to deal with the overwhelming number of enquiries, and waiting times were only a few minutes. But committee chair Nicky Morgan said she had received reports during the meeting of people holding on for nearly 30 minutes before hanging up.
MP John Mann expressed amazement when Pester and TSB chair Richard Meddings professed ignorance of a case when someone had received a letter giving details of someone else’s bank account.
He also slammed the level of compensation - £100 - awarded to a constituent for their ruined wedding.
With Pester profusely apologising several times during the course of the meeting, Mann said the level of compensation amounted to “£1 per apology”.
Morgan described the level of compensation as “absolutely inadequate.”
Overall Pester said the bank had spent £70m on compensation and additional resources to cope with fixing the problems so far.
He was also forced to deny he had deliberately misled the committee at its previous hearing.
Mann asks if heads will roll, but Meddings says that will depend on the outcome of an investigation by Slaughter and May into the causes of the fiasco.
Pester says he will not fall on his sword since he wants to fix the problems, while on the thorny question of possible golden parachutes, Meddings says if people are found to be grossly negligent that will be taken into account in the terms of their departure.
The meeting ended with Nicky Morgan saying she expected the TSB executives to be called back again to update the committee on the progress in fixing the problems.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
In her closing remarks Morgan says unfortunately the saga goes on. The FCA letter says ... TSB has not been open and transparent. The committee cannot remember such a letter from the FCA.
She says, you have confirmed the IT migration has lead to people being fraudulently deprive of their money, life experiences such as weddings and house purchases ruined, the compensation is absolutely inadequate and the problems continue.
This cannot be something you want, ultimately it is not only damaging to TSB but also to other banks in the sector and to online banking.
Unfortunately, although we are grateful to you for your time... it did take an hour and half for you to thank your staff.
I suspect we will ask you to come back again, because we will be keeping a very close eye on what is going on to put all of this right.
Question: will it look at culpability of individuals and the role of the Spanish bank?
Meddings says it will look at the relationship with the platform supplier.
Question: what is the scope of the instructions to Slaughter and May?
Medding says we can provide the terms of reference. The reason it’s a law firm is that part of the terms is about the governance around the decision made to migrate.
Question: how many people have switched to TSB?
Pester says we have not been attracting many new customers to our current accounts.
Morgan asks how much overtime are staff having to do in branches?
Pester says he can’t give figures. Branch transactions are taking longer than we would like. Branches are not operating normally.
Morgan says some of the fraud is done with sim cards so is TSB in contact with the mobile companies?
Pester says yes they have been.
Morgan says there are people trying to call the fraud line and have waited 15 minutes and 27 minutes and given up.
She asks when the Slaughter and May report will be published.
Meddings says there is no date but they have started work. He says he hopes it’s several weeks, not longer than that. But not before the summer holidays. They haven’t given me a deadline date.
Montes is asked if Sabadell should be paid by TSB for this failure?
He says, we are quite conscious about the damage to TSB customers. We know most of it came from bad functioning of the system after migration. We have committed resources to work to a solution. There have not been any kind of discussions about payments,. There won’t be until the solution is finished.
Question: who was really in charge here during this process?
Pester: The responsibility and decision was with the TSB board.
Question: Was the timing, decision making, risk management controlled by TSB?
Pester: Ultimately yes although we used a range of suppliers to opine whether we were in a position to migrate.
Question: clerks here found a forum with customers complaining of receiving letters for other people. Why are you not prepared to make sure your customers are not being defrauded?
Pester says he has acknowledged TSB has sent multiple letters in the same envelope. Again he apologises.
Question: how many customers have left the bank?
Pester: 12,500 customers have switched away, but I do not know causes.
Question: how many staff have you recruited?
Pester: 2,200
Question: are you paying them full overtime?
Pester: yes, we are paying twice normal rate for overtime.
Question: so why weren’t they adequately resourced in the first place?
Pester: we did increase resource before migration, but we didn’t expect this level of problems. We would never have done the migration if we had known we would have these issues.
Question: Payments to Sabadell for migration were delayed until completion. Why?
Pester: To account for any cost overruns.
Question: will the payments be made?
Pester: it will depend on the report into what happened.
On compensation, Pester says if people are not happy they can come back to us.
He says it is easy to register a complaint.
But Pester is accused of not taking on board how serious some of these problems (eg the ruined wedding) are.
Question: can you give a guarantee on a minimum amount?
Pester says he will write to the committee with the figures.
TSB spent £70m on compensation and addition resources so far
Pester is asked about TSB’s profits which he says are around £200m.
He says money should not be an object for resources.
Question: and should not be an object for compensation?
Pester says of course not.
Question: how much have you employed for resources and compensation?
Pester says we have no set amount.
Meddings says we will set an appropriate compensation framework.
To date bank has cancelled charges worth £29m. Have compensated people for fraud of £11.2m, and backlog means it is probably £20m year to date.
Incremental resources, overtime and people, IBM etc, about another £20m.
Montes says the figures are consolidated into Sabadell accounts.
Updated
Question. You have dealt with 24,094 complaints out of 95,063. This is not a significant number. Should you be adding more resources to address this problem?
Pester says we have added 466 extra complaints handlers, over the last week.
We dealt with the 24,000 before this, our aspiration is to close this down as quickly as possible. Every complaint we attempt to deal with within eight weeks of receiving it.
Question: are you prepared to put in extra staff?
Meddings says absolutely yes. We are adding resource as fast as it is possible to do. We have taken more people into branches and call centres, they have to be trained so we are bringing on resources and will continue to do so.
Question: the compensation figures are extraordinarily small. Will anyone who is forced out get golden parachutes?
Meddings says we will look at conclusions, take necessary action. It will depend on outcome and nature of the fault.
If they are found to have been grossly negligent that will be taken into account in the terms of their departure.
Question about the letters written by TSB to direct debit companies when customers wanted to switch, saying customers had died.
Pester says there were 370 people affected and caused by an error in the software.
Pester says they are speaking to the customers’ new banks to contact customers and offer them compensation.
Pester says they are correcting the error with the direct debit companies.
Morgan says you talk about things being resolved but they may not be resolved to the satisfaction of the customers.
Mann says you are in breach of data protection law, you are paying pitiful levels of compensation which I find deeply disturbing, you pay yourselves massive amounts of money. Can we be certain some heads are going to roll?
Meddings says it would be wrong to prejudge. But depending on what investigation we will take action.
Mann asks them - especially Pester - if they will fall on their swords before they are pushed.
Pester says his focus is on fixing this for customers, I am passionate about TSB, I don’t think anyone else will be as committed as me, when we get to end of this procedure we will see.
Mann says where is the leadership?
Meddings says senior seats carry responsibility and we have chosen these seats. It’s important to establish what went wrong and where there is culpability we will act on it.
Updated
Mann asks how many heads will roll?
Meddings says it is important not to prejudge. Slaughter and May are conducting an independent review, we will publish it and take action on the basis of its findings.
If I am found to be culpable then the actions will attach to me.
John Mann asks how could one of his constituents receive someone else’s details.
Pester says he apologies. I don’t know how it happened, I don’t know the circumstances. It’s not something we do intentionally.
Mann asks Meddings the same question.
Meddings says I can’t answer without knowing details.
Mann asks if this an ongong problem.
Pester said he is not aware of it.
Mann says his constituent wrote to TSB and heard nothing back. You’re saying you’re not aware and that’s astonishing. I’m struggling that you’re even aware of the problem.
Mann asks about a constituent whose wedding was ruined and how much she received.
Meddings says she has been compensated but can’t say how much. But it would compensate for distress.
Mann says it’s £100.
[Silence]
Medding says he apologises.
Mann says its £1 per apology in this session.
Mann now asks why Sabadell chief operating officer Miguel Montes is still in his job.
Montes also apologies, and admits not all problems have been solved.
Mann asks how embarrassed is he that his bank’s reputation has been sullied by people who don’t know how people received other people’s details.
Montes says, we are very embarrassed.
Mann: How embarrassed are you about the level of compensation for someone who’s wedding has been ruined?
Montes: I have no competence to answer this question.
Mann: Do you have confidence in working with people who don’t bother compensating someone when it’s raised in parliamentary committee. Is that good for your brand reputation.
Montes: our brand reputation has been damaged. We have worked night and day, we have progress but not enough. Paul and his team have been clear we will do whatever it takes to compensate customers.
Mann says Meddings reputation is on the line as well. How long will this take?
Meddings says, we are working vigilantly. We are digging ourselves out of a hole. We have challenges with the call lines, and occasionally in the branches.
Mann says the branches are bailing you out, and you have put the call centre staff in a difficult situation.
Meddings thanks the bank’s staff for having to deal with the situation.
Question: The FCA has never written such a letter. Do you accept you should take more personal responsibility.
Pester says, I am taking complete and utter responsibility.. All I can do is focus on fixing the situation.
Question: Many on the committee believe you have misled the committee.
Pesters says, I’m sorry if you feel that, I have given the best information I had.
Morgan says in a letter on 25 April you wrote everything it running smoothly for vast majority of customers. FCA said this was an example of poor communication. Do you regret that phrase?
Pester apologies if he misled anyone. The use of that phrase was to show credit card, debit payments [etc] key parts were working well but we had serious problems with customer access.
He says we have tried to communicate as well as we can.
Updated
Question about whether Pester made confusing statement about IBM’s role. Are IBM doing a full review or are they there just to help the situation?
Pestere says they are there to help us fix problems, then perform a review to help us understand how this could have occurred. I apologise for my loose use of wording.
Question: this is not the only loose use of wording. You said it was middlewear but it was more than this and you seem to know this from the IBM slides.
Pester said the IBM findings are early findings and observations and say most of the problems are related to the applications, middleware and network ather than the underlying infrastructure.
I tried to explain this in the first session.
[Pester is asked to hand over the slides and does so.]
Question: The FCA reminded TSB that communications should be fair and not misleading. Do you accept you misled customers and the committee.
Pester says he does not accept he misled committee. The FCA did ask TSB to change and improve communications on 25 April. We did that a day later, and then the FCA said our communications were excellent.
Question: Bailey wrote on 30 May and said the TSB’s use of figures risked giving too positive a view. Do you accept he feels you have not been frank?
Pester says Bailey also said there is no reason to believe TSB has made misleading statements and I apologise if you think.
Question: This is your MO, you’re saying its not that bad. This infuriates everyone, people feel they are being misled.
Pester says this is not my intent. I’m apologetic if you feel I’m trying to spin the information.
Question: Bailey says your quoting of averages is misleading.
Pester says he’s sorry if he appears to be unhelpful but he is telling the facts as he sees them.
Question: In how many cases since the migration, when there has been an investi of the customer being liable, has there been a delay in compensation.
Pester says we said we are not challenging or investigating customers as we created the uncertainty. To the best of my knowledge the answer is zero.
MPs are giving more examples of customers suffering problems.
Pester apologises if he gave the impression he was downplaying the seriousness of the problems facing the bank.
He also says he is sorry if the committee thinks he is not keeping his customers up to date.
Question: Either you knew about the scale of the issues with the fraud line [at the time of the previous committee session] and you didn’t tell us or you didn’t know there was a serious problem with fraud line.
Pester says I told you the information I had at the time.
Question: Banks should refund by the end of the following day when there is fraud. Has TSB done that?
Pester admits TSB has not done that.
Morgan talks about a self employed printer who wanted to access his money. He talks to TSB, gets another call from a mobile, is advised to talk to the person on the mobile. Then he thinks he’s been defrauded, finds £24,550 been taken from his account and TSB say he does not know how long it will be to get his money back. He has problems contacting TSB, finally gets his money back, changes account.
Then he gets a letter, saying TSB is not at fault, and it offered £192. Is that a fair outcome.
Pester says the details are distressing and I apologise. We will of course look at this case, and address them. He was caught up in that attack, I would like to take his case further.
Chairman Richard Meddings also apologies, says its difficult to comment on whether the payments are sufficient. They don’t necessarily seem to be a correct calculation, but we are attempting to set a framework of compensations taking into account stress and consequential loss.
Morgan says the more important point, and where TSB is tone deaf, where the letter suggests customer has to prove the point.
Meddings says, I get your point. When fraudsters raid accounts, banks can says customers are negligent but we are trying to compensate in full without asking about liability.
Morgan says during last hearing, the TSB twitter account said fraud lines were experiencing higher than usual levels. If twitter knew that why didn’t you?
Pester apologies (again!) and says the number he gave in good faith was the number he had at the time.
Morgan says does TSB deserve nickname of Terribly Shambolic Bank?
Pester says this whole situation has been a terrible situation for TSB customers. All I can do is work hard to fix this situation.
Some 2,200 customers suffered fraud attempts
Morgan says Pester had said in a letter yesterday that between 23 April to 31 May, some 2,200 TSB customers had experienced attempts to access their accounts and 1300 suffered financial loss. But the FCA mentioned 10,000 incidents. For some customers this is not happening once but several times. Isn’t it typical that every time TSB is asked, you try to be clever with the numbers.
Pester says he’s sorry if that seems to be the case. The FCA number refers to alerts on accounts, pointing out unusual transaction patterns, which trigger text messages to see if they are genuine. If we don’t hear we block the accounts until we are able to speak to the customer.
The 2,200 number is number of customers who had attempts to defraud.
Morgan says how many fraud incidents where people had money taken out of their accounts were there?
Pester says 1300 had money taken out of their account by fraudsters, and we have refunded them.
Updated
Morgan points out Pester said at the last hearing that people were waiting only three minutes on the fraud line.
Pester says at the last meeting we had not been subject to fraud attacks at that level, it started on the first bank holiday in May, peaked on 15 May, then came under control since. At first meeting we were not subject to those levels of attack.
That was the true statement of the situation at the time.
I am sorry if I appear to have been unforthright in evidence.
Updated
Pester says the system tracking fraud still blocks accounts if it detects unusual patterns etc, so there are other ways than just customer reporting fraud.
Morgan says fraud system hasn’t been working properly though.
Pester says the volume of attacks were 70 times the normal level of attacks. That overwhelmed TSB. So we put in a dedicated line.
Fraud is a terrible experience. That fraud line has a two to three minute wait time. I apologise profusely to those customers who have suffered fraud.
Pester says it is still the same team, but we recruited more partners so we could respond more quickly.
Morgan asks how long people have waited over recent weeks.
Pester says it is a priority line so it is a matter of minutes. We have tightened up our fraud defences, and now volume is two or three times normal level.
Morgan says people are talking about waiting for hours.
Pester says that was before the new line. He apologises again and says it was unacceptable. The level of fraud was unprecedented.
But Morgan says in your planning you anticipated an increase in fraudulent activity, so it wasn’t unprecedented.
Pester says sadly yes, we had our teams on high intensity when we migrated but it was higher than expected.
I have been shocked to read of customers waiting five, seven, nine hours. When I saw that I said we had to fix this. Putting a new line in was very important.
Now TSB are up and Nicky Morgan begins with the issue of fraud.
Question: Have conditions create a spate of fraudulent activity?
Pester says he regrets but the situation gave an opportunity for fraudsters to target customers.
Morgan says they have to phone a dedicated fraud line, and is the route to get compensation.
Pester agrees but they says customers can report fraud to branches or online, but there is a dedicated line.
Ultimately though it all ends up with fraud team.
The FCA session ends on that note.
John Mann ask who should be held to account?
Bailey says that’s the purpose of the investigation. But at the moment the most important thing is to dig out of hole.
Mann says will you use the full range of your powers?
Bailey says we will use the powers.
Question: The last IT meltdown was Co-op. How many other banks are at similar risks with antiquated IT systems?
Bailey says there are major IT changes going on most weekends in the banking systems. This year in particular there has been ringfencing.
In this case it was a complete replatforming, from the Lloyds sytems to a new one.
Most institutions are operating on systems which have evolved over years.
[In terms of risk for other banks] Bailey says he hopes not but you never know.
There is a lot still to learn about this one, he says. What would it take for us to observe this in a way TSB management did not, what level of intrusion would be needed?
We were involved in the Visa incident, that was a hardware failure. We seek to learn but can’t give an assurance these things will never happen again.
Question: Will you set out what minimum compensation should be?
Bailey says we will want to see how they set it up and calibrate it. There should be a minimum standard below which compensation applies. Services have not been affected evenly, this is one of the problems.
Bailey is told the FCA should set down the law otherwise people will not have confidence, especially given the problems small businesses have faced with banks, especially GRG.
Bailey says he hopes they appreciate how much the FCA has been involved with TSB. He says the FCA put a team on site very quickly.
Updated
Question: TSB have appointed Deloitte to look at compensation, how is it going?
Bailey says we are pleased they have brought in outside resources, they have been overwhelmed. They are taking it seriously but we want to see it up and running.
Howard says they are recruiting staff to deal with compensation. They have started to resolve and settle complaints.
Bailey says this should happen quite quickly, it is not very complex. The timeline is short in terms of when things went wrong.
Question: In some cases when customers asked to switch, bank has written to some of their direct debit accounts saying they had died, are you aware of this?
Bailey says that is another example of putting in a fix in to solve a problem and another part sends out a letter. Don’t think they did that intentionally.
Question: Does it undermine the system if people see this happening and are reluctant to switch.
Bailey says longer term we will have to see the level of switching and if it is happening effectively.
Question: are you confident no other banks do this?
Bailey says I think we would know that.
Sutherland says it’s a TSB issue.
Question: Who controlled the timing of migration of IT systems {TSB or parent company?]
Bailey says that will be a major part of the investigation. It was utilising [parent company] Sabadell’s platform but the responsibility rests with TSB managment...
But this can’t descend into finger pointing [between TSB and Sabadell]
Updated
On the question of accountability, Bailey says in this case there is a relationship with an outsourcer (in this case part of the parent company). You can’t outsource responsibility, and it rests with the management of the TSB.
Question: have TSB now got it right?
Bailey says they have improved considerably. The days of the rather generalised and rosy statements, we haven’t seen them so often. But it is still important, there are a lot of things going wrong in branches, quite basis and important things. These things still need fixing and it will take time.
Question: were your expectations on communications reflected in Pester’s testimony.
Bailey says it should have been a more thorough and balances communications situation.
My bias would be tell it as it is and communicate extensively.
Updated
Question: have you ever issued a letter quite like this before, including saying Pester was too optimistic and statements to the public were poor?
Bailey says we don’t have these situations too often.
Some parts of the bank’s service are functioning, and it’s fair enough to point that out but there is a danger of overemphasis of that which gets away from the fact there are parts that are troubled.
Sutherland says they have a torrid time with the branch systems, leading to very busy branches. It’s quite clear those systems problems still exist. It’s the bits that are not working we are not hearing so much about.
Here’s what FCA chief Andrew Bailey told MPs about the fraud attempts on TSB customers (at 2.40pm)
I”m going to be a little bit circumspect about what we say about fraud…as we don’t want to give information that fraudsters could use against the firm.
We think there’s been just over 10,000, 10,600, incidents, and that has resulted in a level of payout.
FCA special advisor John Sutherland then explained how the number of ‘alerts’ of possible fraud are still rising. These alerts lead to customer accounts being blocked or stopped while the situation is investigated - but TSB is struggling to cope.
Sutherland said:
“TSB is resourcing up to clear those alerts as soon as they can, but they are still on an upward trend.
That doesn’t indicate so much that there is an increasing amount of fraud, it’s just that they not resourcing themselves yet to clear them fast enough.
Sutherland then talked about the “huge variability” in TSB’s ability to handle calls from customers who may have been defrauded, with just one in 10 getting through at the busiest times. Clearly that’s not acceptable.
Updated
Question: Do you feel TSB has adhered to the requirements on communcating the situation.
Bailey says we have had some frank conversations about communications, and we said in our letter we were not satisfied.
There is an onus of overcommunication, to tell customers what is happening. There is uncertainty at the start about what the situation is.
Looking at the daily service levels, they were very volatile. Looking at averages doesn’t give the entire picture.
There should have been more communication and it needed to be more reflective of the fact it was a volatile and uncertain situation. Its not easy to communicate volatile. But otherwise you see a lot of criticism from customers.
A more straightforward recognition of what the situation was would have been helpful.
Has TSB always co-operated?
Bailey says yes, they are working very hard, I do not want to call into question their hard work. They are in a hole and they are trying to get out of it.
That is not the issue. The issue is how did you get in and how do you get out of it and protect the interests of customers.
Updated
Bailey is asked about the suggestion that TSB chief executive Paul Pester had some information including slides from IBM which he did not share with the previous hearing.
Bailey says IBM were brought in on the Wednesday, by the following Sunday they had produced slides of the issues. We saw those on Sunday, the hearing followed on Wednesday.
They are not definitive but they do point to things. At the hearings, Pester said IBM believe issues are in the middleware.
But it appears to be not just in the middleware, which the IBM slides show.
Question: where are we in timeline for having a coherent plan for the recovery of services?
Sutherland says there is a rolling fortnight forward plan for fixing faults in IT, but we haven’t seen a plan for getting back to where we were before migration.
Bailey says one of the reasons they brought IBM in was they didn’t have that plan, IBM are helping put that plan in.
Question: does TSB understand the problems, and have the root causes been found?
Bailey says the understanding of the problem has evolved over time. It is still evolving, I do not regard that as particularly negligent.
The rate of emerging faults is falling off, as you would expect.
It would be wrong to speculate [about our investigation] but testing will be one of the key questions. How robust and rigorous was it.
They have put a fix in, and something else happens elsewhere in the architecture, and messages are sent to customers which shouldn’t be. So that gets back to testing.
Question: when was FCA first told about the TSB problems?
Bailey says the first warning that the FCA got was on the Sunday evening, we were notified at one minute to nine o’clock.
They were going live at 6 o’clock, they first identified problems at 6.20.
We heard just before 9,. we had the first call just around midnight.
The FCA response was activated the next day.
Morgan says FCA says they had not met standard for repaying fraud, why was that?
Bailey says they were initially overwhelmed.
The FCA’s Sheree Howard says, they have now prioritised that.
Morgan says is there a pattern of TSB trying to argue the case before refunding.
The FCA says no.
Nicky Morgan, chair of the Treasury committee, says one in ten fraud-related calls being answered is not up to FCA standards, and the FCA agrees.
TSB set up a dedicated fraud line, with the idea that customers would be able to get through more quickly. People can use either line.
Updated
Sutherland said the fraud problem didn’t come up in the first ten days.
FCA: 10,600 fraud incidents at TSB
Bailey is asked about fraud but says he will be circumspect.
He says there have been around 10,600 incidents, which have resulted in a level of payout.
The FSA’s John Sutherland is talking about TSB being alerted to the prospect of fraud, which could lead to customers’ accounts been locked. These are still on an upward trend, as TSB is not resourcing themselves.
There is a huge variability between one in ten calls answered to practically all, depending on time of time. This has led to customers complaining about how long they have been waiting.
Updated
TSB session underway
The TSB session has begun, with the Financial Conduct Authority underway.
Chief executive Andrew Bailey says they have had a full time presence at TSB for some time but they have scaled that back a little now.
A reminder. The parliamentary session on the TSB problems can be seen live here, due to start in less than ten minutes. First up is the Financial Conduct Authority’s chief executive Andrew Bailey and two of his colleagues. The FCA has issued a strong criticism of the performance of TSB and its chief executive Paul Pester over the IT fiasco.
Meanwhile Pester and his team will be quizzed separately once the Treasury Committee is finished with the FCA.
TSB’s troubles shine a spotlight on the problems facing much of the banking sector, says professor Pinar Ozcan of Warwick Business School, that is, outdated technology:
Many established banks’ complicated and siloed IT infrastructures, which were built in the 1970s, make it difficult for them to form a platform that would make sense of the data that is currently stored in a disorganised and non-standard way in separate databases.
Banks typically have vertically integrated pillars, which are all for different products and which don’t really talk to one another. That’s why, when you call your bank for something, they sometimes tell you, we’ve got great rates for a mortgage, and you say, ‘but I actually have a mortgage with you’!
The recent troubles at TSB provide a great example of a nightmare scenario that can arise as banks update their legacy IT systems. And this is a chicken and egg problem in that in order to avoid security breaches like in the case of TSB, banks have been avoiding major overhauls of their systems, but of course, the more they stay in avoidance mode, the less they will be able to provide digital platforms that make sense of data and offer competitive services.
TSB: What's happening today
The parliamentary session on TSB’s IT problems kicks off off in 30 minutes, so here’s a quick reminder/preamble.
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The Treasury committee is holding its second hearing into the TSB IT meltdown. MPs will demand answers about the problems that prevented millions of TSB customers from accessing their accounts in recent weeks - and which still aren’t fully fixed.
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MPs will hear from CEO Paul Pester at 3.30pm. Pester has been accused of complacency last month for not grasping the full extent of the disruption.
- The Financial Conduct Authority has put more pressure on Pester. The FCA has told MPs suggesting that he was too optimistic about the situation and didn’t give MPs a proper account four weeks ago.
- The FCA’s chief executive, Andrew Bailey, will give his assessment of the situation at 2.30pm
- Treasury committee chair Nicky Morgan has said she’s very concerned about the communication failures at TSB.
- Labour shadow City minister Jonathan Reynolds has accused the bank of serious failings.
Some TSB customers continue to report problems accessing services, and some are struggling to getting through to the bank to report problems.....
Thanks for coming back to us Raffaella. I'm glad this is being looked into for you. If you’d like to log a complaint you can log this by completing our online form https://t.co/rbfcgsFnJE. Please accept our apologies for any inconvenience caused. Ian
— TSB (@TSB) June 6, 2018
I’m very sorry to read this, Linda. I can’t apologise enough for the difficulties your husband has had whilst trying to speak with our about this. We’re unable to access any account information through Twitter to investigate this for you, and your husband would 1/3 Graham
— TSB (@TSB) June 6, 2018
Updated
After widespread condemnation, the boss of Qatar Airways has apologised for saying only a man could do his job because it’s such a tricky job.
Akbar Al Baker has now backtracked, claiming he is committed to gender equality and blaming the media for ‘sensationalising’ his comments.
Frankly I’m not sure they needed sensationalising. If you missed the story, Al Baker declared that:
“Of course, it [Qatar Airways] has to be led by a man, because it is a very challenging position.”
Qatar Airways CEO apologises for suggesting a woman could not do his job https://t.co/ZuT7qxc2VW
— The Guardian (@guardian) June 6, 2018
Peter Praet has also hit eurozone bonds.
Bond prices are down, sending yields (interest rates up), following Praet’s hint that the European Central Bank could decide to stop its asset-purchase programme soon.
European bonds sell off, euro raises as #ECB policy makers flagged the prospect of talks to end its debt-buying program pic.twitter.com/hskHuJQjk0
— Caroline Hyde (@CarolineHydeTV) June 6, 2018
Praet’s comments suggest the ECB isn’t panicking about the new populist government in Italy.
Kit Juckes of Societe Generale says:
Everyone in Europe seems to be in a terrific rush at the moment. Italian political developments continue at a rapid pace as the new Government flexes muscles and outlines it strategy.
The ECB, widely assumed to be in ait-and-see mode, reluctant to rush towards policy normalisation until the BTP [Italian bond] market, at least, calms down, is also in too much of a hurry for such niceties.
Back in the markets, the euro is rallying after a senior policymaker hinted that the European Central Bank could wind down its bond-buying stimulus programme soon.
ECB chief economist Peter Praet told a conference in Berlin this morning that the governing council will debate whether to gradually unwind bond purchases at its meeting next week.
Praet cited the (long-awaited) recovery in Europe’s labour market; the Eurozone unemployment rate fell to 8.5 percent in April, a 10-year low. That should push inflationary pressures higher, and give the ECB confidence to rein in its money-printing scheme.
The ECB’s is currently committed to buying €30bn of eurozone government bonds each month with newly created money, until at least September. Praet’s comments suggest that the ECB will discuss ending QE in three months, although a final decision might not come until July’s meeting.
The euro has jumped by half a cent against the US dollar to $1.177, a two-week high.
#euro, #ECB: EUR/USD is bouncing on Peter Praet's hawkish comments that labour market tigthness is translating into stronger pick-up in wage growth. A sign that ECB is going to see through Italy. This should keep a floor under EUR/USD while pressure on BTPs is set to stay. pic.twitter.com/94Uq4ENnoa
— Thomas Harr (@ThomasHarr4) June 6, 2018
Updated
The Labour party have added their voice to the chorus of criticism of TSB.
Jonathan Reynolds MP, Labour’s Shadow City Minister, says:
“It is deeply worrying that one month on from these issues, some TSB customers are still having difficulties. Labour echo the concerns of the FCA that communications have simply not been good enough.
“There has plainly been a serious failure here, both in contingency preparations for a meltdown and in assuring an adequate level of customer communication.”
TSB’s problems worsened last week when the bank sent letters of apology to the wrong customers.
Some of the letters included other people’s names, addresses and customer reference numbers. That means they could breach Britain’s new data privacy laws, the General Data Protection Regulation.
Andy Barratt, UK managing director of cyber security consultancy Coalfire, thinks TSB could be fined by the Information Commissioner for the breach. The ICO was also concerned that hundreds of TSB customers saw the wrong account details in the hours after April’s migration.
Barratt explains:
“The apology letter glitch is the latest development in this ongoing TSB saga. MPs are clearly taking this issue seriously but, crucially, we’re yet to see the ICO weigh in following its own investigations. The regulator will be particularly concerned that ‘data breaches’ of this magnitude have now happened more than once – both immediately before and then again after the implementation of GDPR.
“The power to hand out major fines that GDPR affords the regulator means that the price of poor data protection is about to become far easier to quantify.
TSB customers are still reporting problems accessing their accounts to the bank’s social media unit, six weeks after the IT problems began.
Many are saying they can’t get through to TSB’s telephone helplines....
I'm really sorry for this Chelsie. Our Telephone Banking team are currently experiencing a higher volume of calls than usual, have you now been able to speak to someone regarding this? Sophie
— TSB (@TSB) June 5, 2018
I'm really sorry Mark. Unfortunately we're unable to arrange for someone to call you, I'm sorry for nay inconvenience caused. Please rest assured they'll answer as soon as possible. Sophie
— TSB (@TSB) June 5, 2018
Others report that they can’t see their accounts online, or make certain payments.
Hello Andy. We are sorry to read that. Thanks for contacting us. We have looked into this for you and your accounts are being reflected accurately in our systems. However, we currently have a problem with displaying the information online and through the mobile app. 1/2 Ese
— TSB (@TSB) June 4, 2018
Any idea when it will be up and running, I need to transfer asap for a mortgage payment before i get another late payment! pic.twitter.com/LDKbDvGjuy
— Gemma Conlin-Smith (@Conlin86) June 6, 2018
The Financial Conduct Authority appears to have put Paul Pester in a real spot, by accusing him of being too optimistic about the state of TSB’s tech problems.
If the Treasury committee feel Pester wasn’t straight with them last month, they could put him under serious pressure. Pester has already given up one bonus - for completing the IT migration. Could his job be at risk?
The Times’s banking editor, Katherine Griffiths, suggests TSB may needed to be rebranded as Sabadell (the Spanish company which bought TSB in 2015).
But Pester might not oversee such a change, if he finds himself “up against the wall” over his handling of the crisis, she adds.
Technology failure puts TSB boss in crosshairs of trigger-happy MPs - today's @KGriffithsTimes column https://t.co/uTjnRnl37l via @TimesBusiness pic.twitter.com/USZpXwzwsy
— Richard Fletcher (@fletcherr) June 6, 2018
The BBC’s Kevin Peachey agrees that the FCA’s public criticism of a serving bank boss is pretty rare:
TSB's optimism problem - this kind of criticism of a bank boss from the regulator is very unusual #TSB https://t.co/Zixc9jefg4
— Kevin Peachey (@PeacheyK) June 6, 2018
MoneySavingExpert have put together a few questions for Paul Pester to answer at today’s hearing:
- The number of customers that have been affected by the online and mobile banking problems and the number that are still facing problems.
- The number of customers that have lost money to fraudsters, whether TSB feels that after this event its account security processes are still sufficient, and the steps that are being taken to improve this.
- The number of customers that have switched away from the bank, and how many have reported problems - for example, being unable to switch or cancelled direct debits after switching.
- The minimum amount of money affected TSB customers can expect to be paid as compensation for their loss and inconvenience – this needs to be more specific than ‘on a case-by-case basis’. How will it let people proactively know what they are due?
- The number of complaints the bank has received from customers, the number that have now been resolved, and the average wait time these customers have experienced, both when ringing the phone lines and overall before their complaint is resolved.
- When TSB expects the IT problems to be fully fixed – if a date cannot be given, why not?
The Treasury committee’s first hearing into the TSB crisis, last month, was a very bruising experience.
MPs lost patience with the bank as Paul Pester repeatedly argued that much of the IT migration had gone well (even if customers couldn’t actually access their accounts).
Nicky Morgan eventually let rip, telling Pester he was a “staggering example of a chief executive who seems unwilling to acknowledge the scale of the problem”.
Here’s a clip from the May 2nd hearing:
TSB is still suffering problems, more than six weeks after the ill-fated migration from its former owner Lloyds to its current owned Sabadell.
The bank’s service status page warns that some customers are still having issues logging into internet banking, or having difficulties making payments. Also, some Direct Debit payments weren’t taken for TSB credit card customers this month.
TSB also admits that some customers calling Telephone Banking are experiencing long wait times, and that its branches are busier than usual too.
Nicky Morgan: Deeply concerned about TSB's communication failings
Nicky Morgan MP, the chair of the Treasury Committee, has piled more pressure on Paul Pester ahead of this afternoon’s interrogation.
Morgan says she is “deeply concerned by TSB’s poor communications” over its IT problems.
Last week, the Financial Conduct Authority told the Committee it is ‘dissatisfied’ with TSB’s communications with its customers.
For example, FCA chief Andrew Bailey says that TSB claimed that “the vast majority” of customers could access their online account, when in reality only 50% could successfully log in the first time they tried.
That’s one reason Bailey is accusing Pester of giving an “optimistic” view of the situation when he faced MPs last month, rather than a “more rounded view” of the problems suffered by customers.
Morgan says this isn’t acceptable:
“The regulator does not make such criticisms lightly. I am deeply concerned by TSB’s poor communications about the scale and nature of the problems it has faced; by its response to customer fraud; and by the quality and accuracy of the oral and written evidence provided by Dr Pester to the Committee.
“The Committee will discuss Mr Bailey’s letter, and the ongoing problems faced by TSB customers, when it sees Dr Pester and other TSB Board members, as well as the FCA, on Wednesday.”
.@TheFCA has responded to the Committee's letter about the IT problems at TSB. @NickyMorgan01 has said she is "deeply concerned by TSB's poor communications" about its IT problems. Read the full story - including @TheFCA letter - here: https://t.co/VFRpkCpyNL pic.twitter.com/rvof0AXNfv
— Treasury Committee (@CommonsTreasury) June 5, 2018
The agenda: TSB bosses face another grilling
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The beleaguered boss of UK bank TSB is being hauled back to parliament today to face fresh questioning over the IT meltdown that left millions locked out of their accounts.
Paul Pester is in the firing line over his handling of the crisis, and can expect plenty of criticism and tough questions from MPs on the Treasury Committee.
Last month, the committee accused Pester of being ‘extraordinary complacent’ over the botched migration to a new technology platform, so today’s session could intensify the pressure.
TSB’s IT crisis is one of the worst to have hit a bank ever - customers found they couldn’t log on via their computer or mobile phones, small businesses were unable to pay staff, and some householders found their mortgages had disappeared.
Cybercriminals have been taking advantage too, with reports that some TSB customers are falling victim to fraud.
Overnight, the Financial Conduct Authority - the City’s watchdog - has confirmed it is investigating the issue.
Andrew Bailey, chief executive of the FCA, says:
“We do not normally make this information public, but, given the level of public interest, I want to be clear that we will be conducting this work.”
The FCA has also put Pester in the firing line, accusing him of failing to come clean about TSB’s problems.
My colleague Angela Monaghan explains:
The City regulator has launched a stinging attack on the chief executive of TSB over the bank’s failure to be open and transparent with customers when an IT upgrade went badly wrong, locking as many as 1.9 million customers out of their accounts.
The Financial Conduct Authority accused Paul Pester of “portraying an optimistic view” of services after the botched operation in April that is still causing disruption for customers more than a month on.
“The FCA has been dissatisfied with TSB’s communications with its customers and we have had concerns that TSB was not being open and transparent about the issues experienced,” Andrew Bailey, the FCA’s chief executive, said in a letter to the Commons Treasury committee.
In particular, the FCA think that Pester could have given MPs more information about the crisis when he initially testified on May 2nd. They believe he may have had useful information from the tech experts at IBM who have been trying to fix the problems.
The session kicks off at 2.30pm, when the Treasury committee will hear from the FCA.
They’ll then question Pester, along with TSB chairman Richard Meddings and Miguel Montes of parent company Sabadell Group.
Also coming up today
More European stock markets are rising in early trading, after America’s tech-focused Nasdaq index hit a record high last night.
Jasper Lawler of London Capital Group explains:
Tech stock were once again responsible for any excitement on Wall Street. Netflix and Amazon jumping 1.9% and 1.1% respectively boosted the Nasdaq to close at a record high at 7637.
This is the second straight session where tech stocks have been under the spotlight and we are seeing a lot of positive news surrounding the sector, Microsoft buying GitHub, Apple pushing new software and Amazon sales flying, when everything else in the market is looking a little drab.
On the economics front, Australia’s growth rate has picked thanks to booming demand for commodities:
The agenda:
- 2.30pm BST: FCA testify to the Treasury committee on the TSB IT crisis
- 3.30pm BST: TSB bosses testify to the Treasury committee
We have two panels today on the service disruption at TSB. First up is @TheFCA. We'll hear from Andrew Bailey, John Sutherland and Sheree Howard. Watch it live from 2.30pm here: https://t.co/0mYzbGfZMT pic.twitter.com/clnYRsQ0Zg
— Treasury Committee (@CommonsTreasury) June 6, 2018
Our second panel today on the service disruption at TSB is with Paul Pester, chief executive of TSB, Richard Meddings, chairman of TSB, and Miquel Montes, chief operating office of Sabadell. Watch it live from 3.30pm here: https://t.co/0mYzbGfZMT pic.twitter.com/QlCNUUst6u
— Treasury Committee (@CommonsTreasury) June 6, 2018
Updated
