Financial services regulators urged to reduce ‘unacceptable’ number of IT failures

A new report from the Treasury Committee has suggested the current level of IT failures in the financial services sector is ‘unacceptable.’

The report, which notes that bank branches and cash machines are disappearing, suggested that customers are increasingly expected to rely on online banking services, but that these services have been significantly disrupted due to IT failures – harming customers left without access to their financial services.

While the Treasury Committee’s findings acknowledged completely uninterrupted access to banking services cannot be achieved, it has suggested that prolonged IT failures should not be tolerated – finding the current level, and frequency, of disruption and consumer harm to be unacceptable.

The Treasury Committee’s lead member for the inquiry, Steve Baker MP, said: “The number of IT failures that have occurred in the financial services sector, including TSB, Visa and Barclays, and the harm caused to consumers, is unacceptable.

“The Committee, therefore, launched this inquiry 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.

“The regulators must take action to improve the operational resilience of financial services sector firms. They should increase the financial sector levies if greater resources are required, ensure individuals and firms are held to account for their role in IT failures, and ensure that firms resolve customer complaints and award compensation quickly.”

The Treasury Committee noted that while the role of regulators in supervising operational resilience is still developing, they must ensure their approach is agile to adapt to changing risks.

The Committee is urging regulators to maintain a very low tolerance for service disruption, by providing guidance on what level of impact should be tolerated, and it has also suggested regulators cannot allow firms to set their own tolerance for disruption to be too high – to avoid lax operational resilience.

“For too long, financial institutions issue hollow words after their systems have failed, which is of no help to customers left cashless and cut-off,” Baker continued.

“And for too long, we have waited for a comprehensive account of what happened during the TSB IT failure. Our inquiry into Service Disruption at TSB remains open, and I’ve no doubt that the Committee will want to examine Slaughter and May’s report and the progress of the regulators’ investigation.

“The Committee has made a series of recommendations to the Government and regulators on how the impact of IT failures can be prevented and mitigated, to ensure that consumers are protected.”

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