Bashing Bankers, Part 1 - RBS

These days it seems that not a week goes by without a new banking scandal, accompanied by an orgy of “banker bashing” by the media, politicians, and the public at large. As I write the focus is on Libor-fixing at Barclays, but before that story broke, we were all outraged by the systems meltdown at RBS. Is this outrage justified? My view is that these two very different cases illustrate that the answer is sometimes yes, sometimes no.

Let’s start with RBS. In mid June, a massive systems failure left millions of customers unable to access their accounts or make payments for a week or more. The hapless CEO Stephen Hester was hauled before a Treasury Select Committee, roundly condemned by all and sundry, and forced to forego his bonus, again.

Personally, I have sympathy with Hester and with RBS as a whole. Anyone who has any experience of large IT systems knows that occasional failures are a fact of life. The RBS failure seems to have been caused by a toxic combination of ancient legacy systems cobbled together as RBS was formed from multiple mergers and acquisitions over the years, inexperienced staff, and human error, exacerbated by the sheer size of the bank. Yes, they should have had better procedures and controls in place. Yes, there is an element of incompetence. But there is also an element of plain bad luck – these things happen.

In fact I’m inclined to take a positive message from the incident. For the vast majority of the time the “plumbing” underlying basic bank transaction processing works surprisingly well. Payments are processed reliably and recorded accurately in our accounts. I’ve always thought that in this respect the UK banking and payments industry does a good job. Not only is this not widely appreciated but we expect the service for free.

So taking all this into account my verdict on RBS is “unfairly bashed”.

In contrast, I believe banker bashing really is justified in the case of Libor-fixing at Barclays; but that’s next month’s story!

Banking Automation Bulletin Article, August 2012, by Nick Collin