Stricter regulation and fines may be required to protect consumers from devastating bank IT failures, according to MPs.
A report from the Treasury Committee said that high-profile bank IT failures were “unacceptable” and have impacted customers across the country.
Many consumers are left “cashless and cut off” due to bank IT failures, the report highlighted – an issue which organisations must address to prevent future disruption. The report said that banks are obligated to do more to improve IT resilience, as well as improving their reaction time in regards to compensation for customers.
Last year, TSB suffered a significant IT failure which saw customers across the country locked out of their accounts. The meltdown was caused by the bank’s migration to a new IT system.
Commenting on the report, Steve Baker, lead member of the Treasury Committee Inquiry said: “The number of IT failures that have occurred in the financial services sector, including TSB, Visa and Barclays, and the harm caused to customers is unacceptable.
“The committee, therefore, launched this enquiry to look ‘under the bonnet’ at what’s causing the proliferation of such incidents, and what the regulators can do to prevent and mitigate their impacts.”
Baker suggested that financial institutions have failed their customers repeatedly with ‘hollow words’ and apologies in the wake of disruptive incidents.
Three of the UK’s largest regulators – the Financial Conduct Authority (FCA), Prudential Regulation Authority and the Bank of England – simply do not have the staff bandwidth to handle the increasing number of IT failures experienced by consumers, the report warned.
To combat repeated failures, MPs suggested that greater financial levies on banks could be required to provide funding boosts to regulators.
Responding to the Treasury Committee’s report into IT failures, UK Finance chief executive Stephen Jones said: “Operational resilience is crucial in a modern financial system and the industry continues to invest billions to ensure systems, human and digital, are robust and secure.
“When incidents do occur, firms work around the clock to minimise disruption and get services back up and running as quickly as possible.”
In addition to the impact of banking failures, MPs voiced concerns over the growing involvement of third-party providers for data storage services and recommended stricter regulation.
Cloud services provided by major technology firms such as Amazon, MPs warned, stand out as a source of “systematic risk” for the financial services sector and consumers.
The report noted: “The consequences of a major operational incident as a large cloud service provider, such as Microsoft, Google or Amazon, could be significant. There is, therefore, a considerable case for the regulation of these cloud service providers to ensure high standards of operational resilience.”