Experts reflect on RBS failure

Where the blame lies…

Commenting on BBC business editor Robert Peston’s comments about the RBS/NatWest account access debacle on BBC Radio 4’s Today programme, Lieberman Software says that the incident highlights the reliance that many large organisations have on software code – and systems – that are well past their sell-by dates, and that banks don’t have the incentive to change.

According to Philip Lieberman, president of the IT security specialist, Mr Peston said in his radio broadcast that first priority of a bank is to keep people’s money safe, whilst the second priority is to allow us access to our money – and allow us to move that money around.

“In many of our interactions with large UK banks, we have found them to be dinosaurs. As Mr Peston says, NatWest/RBS will have to provide a very detailed explanation to the regulator about what went wrong, but I think the noteworthy aspect of his broadcast was when he said that `all the big banks have these big old legacy computer systems that they have to update to ensure they continue to work in the way we would expect,’ as this shows what IT managers are up against in situations like this,” he said.

“The other point made – that of the fact that banks also do a vast amount of outsourcing to outside companies – is also quite significant, as our observations are that legacy systems can rarely be economically handled in-house, which is why they tend to be outsourced,” he added.

The Lieberman Software president went on to say that the reason why RBS/NatWest is `hanging on’ to its legacy computer hardware and software is because it has around 17 million personal customers and many millions of business customers supported by such systems.

Most large banks are running antique IT shops that operate as isolated silos, as well as senior management with little to no interest in implementing modern technology, much less paying for it. The government has provided no incentives for these banks to invest in new technology and there are no penalties for poor service or inadequate security.

Hopefully the UK government will create appropriate incentives for new players to enter the market. In the USA we have seen substantial improvements in banks with the emergence of credit unions as well as the strengthening of mid-market banks. The availability of competitors has improved banking substantially, he added.

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