In a letter to the chairman of the Treasury select committee, the FCA's chief executive Andrew Bailey said TSB's response to the fiasco risked bringing the whole banking sector into disrepute.
Addressing the FCA's investigation, Mr Bailey said: "We do not normally make this information public, but given the level of public interest, I want to be clear that we will be conducting this work."
Mr Bailey, along with TSB's chief executive Paul Pester, will be appearing before the select committee later today to give evidence on the crisis.
Problems with TSB's IT system began in April, when the bank began moving its customer data from a system controlled by its former owner, Lloyds Banking Group, to a new system built by its new owner, the Spanish banking group, Banco Sabadell.
The new system proved unable to cope with the number of people attempting to use it and, weeks later, some TSB customers are still facing problems.
Since then Action Fraud has warned of a sharp rise in fraudsters, spotting an opportunity to take advantage of customers, sending out fake text messages and phishing emails claiming to be from TSB.
In his letter to the committee, Mr Bailey said that during his previous appearance before MPs in May Mr Pester had given an "optimistic view" of the state of TSB's services at the time.
Mr Bailey said: "The reason for this judgement is that in conditions of highly volatile service levels, any single number is less meaningful than when a service level is stable, and in this case risked giving too positive a view.
"The numbers are arguable, but in my view greater caution would have made sense."
Mr Bailey added that the FCA was "dissatisfied" with TSB's communications with its customers and was concerned the bank was not being open and transparent about the problems it was facing.
As an example of this, he referred to an instance where TSB said "the vast majority" of customers were able to access their online accounts at a time when there was a successful first-time login rate of only 50 per cent on the web channel.
In response to Mr Bailey's comments, the chairman of the committee, Nicky Morgan, said: "The regulator does not make such criticisms lightly.
"I am deeply concerned by TSB’s poor communications about the scale and nature of the problems it has faced; by its response to customer fraud; and by the quality and accuracy of the oral and written evidence provided by Dr Pester to the committee."
A TSB spokesperson said: "We look forward to updating the committee on the work TSB has undertaken to resolve problems for customers since our last appearance.
"We recognise that we have more to do to restore the bank’s operations to the level that customers expect and are completely focused on that and ensuring customers are not left out of pocket."
damian.fantato@ft.com
