TSB is heading for a multi-million pound legal dispute with its Spanish parent Sabadell, after the challenger bank’s shift to a new IT platform entered its second week of meltdown, The Mail on Sunday has learned.
Although TSB chief executive Paul Pester has been the public face of the scandal in the UK, the software that caused the problems was installed by Sabadell’s technology offshoot, Sabis.
Supporters of Pester therefore believe he is being scapegoated for the disaster that has crippled his bank. The TSB chief is respected in the banking industry and commands a high level of loyalty from his colleagues.
Scapegoat: Supporters of Pester (top right) believe he is being scapegoated for the IT disaster. Also pictured, Sabadelle boss Jaime Guardiola (bottom right) and chairman Josep Oliu (bottom centre)
Allies said he has been ‘betrayed’ by a ‘bunch of Spanish numpties’ who ‘trashed’ the bank he worked so hard to build up as a challenger to the Big Four.
So-called middleware put in by Sabis is at the root of the woes inflicted on millions of customers.
The European Central Bank is monitoring the situation. TSB is meant to be paying Sabadell hundreds of millions of pounds for the IT platform but if any of that is withheld for fines or damage to TSB, that would affect the Spanish bank’s capital position.
TSB has held talks with British regulators Andrew Bailey of the FCA and Sam Woods, head of the Prudential Regulation Authority, which oversees the stability of the financial system.
Sabis is understood to have given TSB a written assurance that the parts of the system for which they were responsible had been comprehensively tested. The affair is almost certain to end up in a legal dispute between TSB and its parents over the payment for the software.
TSB was given a £450 million dowry by its former parent Lloyds and much of it would have been earmarked for the new IT. Sabadell issued a press release last weekend celebrating what it thought was a job well done. Images have since emerged of developers in Spain drinking cava to toast the data transfers.
An IT expert said: ‘We were being told by Sabis that the system just needed a few minor tweaks. There were just some issues with configuration settings.’
Sabadell chairman Josep Oliu and chief executive Jaime Guardiola Romojaro were last week enjoying the Barcelona Open tennis tournament while TSB staff in the UK worked tirelessly to try to fix the IT collapse.
Pester has taken personal control of the crisis from Sabadell following conversations with Oliu. He has ousted Sabis and installed a crack team from computer giant IBM, but it is still not clear when the issues will be resolved.
Pester has come under pressure to surrender his £1.6 million bonus but is unlikely to do so ahead of a legal dispute in case this was misinterpreted as an admission of guilt.
There are likely to be a number of investigations into what went wrong, including an independent inquiry commissioned by TSB itself. Pester would give up his bonus if found to be at fault in any of the probes.
Regulators in the UK could fine TSB tens of millions of pounds, sources said. There could be a hefty compensation bill on top.
Disaster struck when TSB moved off the IT systems of its former parent Lloyds and on to a new platform provided by Sabadell. The Spanish bank had persuaded its own shareholders to back its takeover of TSB by boasting of its IT prowess.
A major transfer of data last weekend wreaked havoc with some customers temporarily seeing accounts on screen that did not belong to them. Some firms were unable to pay their staff.
The debacle is devastating for Pester personally as he has set out his stall as a champion of customer service in contrast with the tarnished Big Four.
One rival banking boss told The Mail on Sunday that TSB is likely to face ‘severe’ repercussions. The source said regulators are likely to put TSB under a Section 166 probe – a formal investigation by an independent expert.
RBS was fined £56 million over IT problems in 2012. The lender was ordered to pay a further £125 million in compensation to customers.
Pester declined to comment on his future, his bonus or who is to blame.
However, he told Financial Mail: ‘I am truly sorry for the problems we have had and you have my absolute commitment no customer will be out of pocket. We will get TSB back to where it should be – delivering better banking.’