‘Risk to challenger banks from big bank failures’

‘Risk to challenger banks from big bank failures’

The fragility of the UK banking payment infrastructure could have huge implications for challenger banks and clients that advisers put with these newcomers, Derek Cummings has warned.

Commenting on the IT systems failures of RBS and NatWest last week, when 600,000 payments to RBS, NatWest, Coutts and Ulster Bank customers failed to enter customers’ accounts, the director of risk consultants Protiviti said there would be knock-on problems for challenger banks.

He said: “Currently, new banks entering the market rely upon establishing an agency banking agreement with one of the existing ‘Big Four’ clearing banks, such as RBS, to use the existing UK payments infrastructure.”

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But he added that with the risk of IT failure endemic at the largest banks because of their “ageing infrastructure”, this left small challenger banks “at the [large banks’] mercy”.

Mr Cummings called for challenger banks to have direct access to the UK payments infrastructure, with “significant” focus on providing reliable and cost-effective payment services.

Meanwhile, the Treasury select committee chairman Andrew Tyrie has written to the chief executives of the FCA and RBS over the “unacceptable” IT failure over payments.

Right to reply

An RBS spokesperson said: “We have fixed the underlying issue which caused a delay to payments and direct debits being applied to some customer accounts. We apologise for the inconvenience caused. We will ensure no customers are left out of pocket as a result.”