An IT meltdown at the TSB bank has left 1.9 million customers without access to online banking for almost a week. The TSB bank is a subsidiary of Spanish banking conglomerate Sabadell Group and originally part of the Lloyds Banking Group. The TSB was divested following instructions from the European Commission as the 43% held by the British Government was considered an illicit state aid.
The current difficulties faced by the TSB is not the first time a British bank has had IT issues – RBS was fined £56 million for a similar event which occurred in 2012. In this latest banking debacle, things have got so bad that the CEO, Paul Lester, was quoted as saying the bank is “on its knees”. Not only were customers unable to access their accounts online, but some customers found that their accounts had been emptied and some were credited with funds that didn’t belong to them.
Not surprisingly the CEO has been asked if he will be standing down, but he has said that currently, he is too busy to think about resigning. Pester has persuaded the parent company, Sabadell, to give him control of the faulty software and brought in experts from IBM to try and fix the bug-riddled code. The CEO is now offering financial incentives to the thousands of customers that are planning to look elsewhere for their banking needs. Pester will be increasing the interest rate on the Classic Plus account from 3 to 5%. This “bribe” will cost the bank a small fortune in addition to the cost of the resolving the problems with the software. Presumably, the Financial Conduct Authority (FCA) will also hit the bank with a sizable fine in due course.
The calamity at the TSB bank comes at the same time as the cryptocurrency ecosystem goes from strength to strength. Almost $100 million was recently transferred via the Litecoin blockchain within a couple of seconds at the cost of just 40 cents. The problem with fiat banking systems is that they all have a central point of weakness, which is not present within a decentralized blockchain network. The bitcoin blockchain has been running for almost ten years without any of the incidents that have affected high street banks in recent years. It will be interesting to see how many TSB customers decide to switch their funds to cryptocurrencies in the coming months.
Financial analyst, smartphone app designer, technical writer, and crypto enthusiast. Blockchain verified graduate of MOOC 9, DFIN-511: Introduction to Digital Currencies, run by the University of Nicosia.