TSB outage: CEO Paul Pester quits after IT meltdown

Chief executive steps down after seven years in charge

30/07/2018: TSB's IT meltdown cost it nearly 200m

TSB's chaotic IT migration has cost the bank almost 200 million, according to its half-year financial results for the six months to 30 June 2018.

The bank made a statutory loss before tax of 107.4 million after it suffered a week-long outage trying to migrate its IT systems from Lloyds Banking Group Systems.

The financial results show that the IT migration has so far cost the bank 174.6m, with extra outgoings including 115.8m on customer redress, remediation resource and fraud costs, 30.7m on additional resource and advisory costs and 29.9m on waived fees and charges.

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The initial aim of the migration was to save TSB 200 million in annual fees for having its IT system hosted by Lloyds, but the meltdown and its aftermath hit the bank hard in the first six months of 2018.

"Our priority in the second half of the year continues to be putting things right for our customers," said TSB CEO Paul Pester. "Looking further ahead we are determined to get back to bringing more competition to UK banking and ultimately making banking better for consumers and small businesses."

TSB, which is owned by Spanish Sabadell Group, left many of its customers locked out of online services for a week at the end of April because of a botched IT migration when it separated from Lloyds Banking Group's systems.

Despite announcing the problem had been sorted on a number of occasions and even bringing in IBM to help with the migration problems, many customers were still having issues well into the summer.

"I know how frustrated many customers have been by what's happened," added Pester. "It was not acceptable, and was not the level of service that we pride ourselves on, nor was it what our customers have come to expect from TSB.

"It has been a difficult time for customers and I am grateful for their patience. I would also like to say thank you to our Partners for their enormous efforts."

22/06/2018: IBM suggests TSB's meltdown was due to a lack of testing

An IBM report into the IT meltdown at TSB has suggested the bank did not carry out rigorous enough testing and went further than the previously reported middleware issues.

TSB, who are a subsidiary of the Spanish Sabadell Group, left many of its customers locked out of online services for a week at the end of April because of a botched bodged IT migration when it separated from Lloyds Banking Group's systems.

As the problems spiralled out of control the bank called in IBM to identify the problems, which the bank's CEO Paul Pester told MPs was due to issues with its middleware systems.

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However, a slide deck of the IBM report has been published by the Treasury Committee and it suggests the banks testing was not sufficient, saying it "has not seen evidence of the application of a rigorous set of go-live criteria to prove production readiness".

"To address this risk profile, IBM would expect world-class design rigour, test discipline, comprehensive operational proving, cut-over trial runs and operational support set-up," it said.

In a bullet-pointed section of the report, IBM suggests that TSB were not able to demonstrate any of its standards for testing.

"Performance testing did not provide the required evidence of capacity and the lack of active-active test environments have materialised risk due to issues with global load balancing (GLB) across data centres," Big Blue stated.

TSB responded with a statement that downplayed the report and called it 'out of date".

"The IBM document contained a preliminary work plan with very early hypotheses based on observations to date, that were produced after only three days of engagement with TSB, almost eight weeks ago. The content is therefore now very much out of date," the bank said.

"The hypotheses were not final, nor were they a validated view of what went wrong or of the actions that have subsequently been taken. Without this context, this document could be misinterpreted to the detriment of TSB's customers."

08/06/2018: Treasury Committee has 'lost confidence' in CEO Paul Pester

Following the Treasury Committee's probe of TSB over its large IT outage and resultant customer fraud, MPs have "lost confidence" in chief executive Paul Pester.

MP Nicky Morgan, chair of the Committee wrote a letter to Pester and TSB noting the MPs do not feel that he had the ability to handle the IT outage and subsequent fall out of TSB's botched IT migration.

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"As a result, the Committee considers that the TSB Board should give serious consideration as to whether Dr Pester's position as Chief Executive of TSB is sustainable," the letter said.

"The Committee has lost confidence in his ability to provide a full and frank assessment of the problems at TSB, and to deal with them in the best interests of its customers. It is concerned that, if he continues in his position, this could damage trust not only in TSB, but in the retail banking sector as a whole. I ask that the Board consider the Committee's view as a matter of urgency."

Morgan was particularly damning about the way Pester was said to have handled the communication of TSB's IT woes and the extent of its effects, noting that Pester had denied problems on TSB's fraud reporting line and noted that "everything is running smoothly" for the vast majority of TSB customers.

"Since the IT problems at TSB began, its public communications have often been complacent and misleading. This tone has been set from the top by Paul Pester and whether intentionally or not, he has not been straight with the Committee and TSB customers," said Morgan commenting on her correspondence with Pester and TSB.

07/06/2018: TSB admits fraud affected thousands of customers during IT outage

TSB bosses admitted yesterday that 2,200 customers were subject to fraud amid the bank's IT fiasco.

Appearing in front of the Treasury Select Committee in the House of Commons, CEO Paul Pester said 2,200 had experienced fraudulent attempts to access their accounts and 1,300 had actually had money stolen from their accounts.

The bank is refunding those customers, Pester said, and admitted that fraud levels were 70 times higher than normal last month, with the bank sending out 10,600 alerts about potential fraud to customers.

TSB has set up a dedicated fraud line to deal with these issues, claiming that wait times were only a few minutes, but Treasury committee chair Nicky Morgan said she understood that customers had being kept waiting for half an hour before hanging up.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), which is investigating TSB's handling of the online banking outage, which started in late April, said earlier in the session that TSB bosses were "in a hole and they have got to get themselves out of that hole".

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Customer trust has been affected by the handling of the crisis, according to the Federation of Small Businesses, which urged the bank to refund affected SMBs for the disruption to their operations.

"It's vital that small business owners affected by the TSB meltdown are compensated," said national chairman Mike Cherry. "The disruption has cost small firms time and money, and left them unable to pay panicked staff. Perhaps most troubling, business accounts have been accessed by external parties who have preyed on those affected with phishing texts and emails.

"Many business owners have been kept on-hold to busy phone contact centres, unable to get the help they need."

The FCA can impose an unlimited fine on TSB for the outage, which occurred when TSB's Spanish owner, Sabadell, tried to migrate the bank's IT system from an expensive replica the bank was renting from former owner Lloyds' and onto its own infrastructure.

The outage has yet to be fixed at the time of writing.

Image: Shutterstock

06/06/2018: FCA investigates TSB's disastrous IT migration

The Financial Conduct Authority (FCA) has accused TSB bosses of "portraying an optimistic view" of the bank's services during its botched IT upgrade, confirming it is investigating the outages still plaguing retail and business customers.

The City regulator said that TSB chief executive Paul Pester was not open and transparent with customers who had been locked out of their accounts after the bank attempted to migrate to a new IT system in April.

In a letter to the Commons Treasury Select Committee, FCA chief executive Andrew Bailey said that the lack of communication could negatively affect the whole banking sector.

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"The FCA has been dissatisfied with TSB's communications with its customers and we have had concerns that TSB was not being open and transparent about the issues experienced," he wrote. "The current communications were perceived as poor, and could reduce trust in TSB and in the banking sector as a whole."

He added: "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 [an investigation]."

Bailey suggested that CEO Pester, TSB chairman Richard Meddings and a representative from TSB's parent company, Spanish banking group Sabadell, had more information from the IBM team drafted in to help mend the system than they shared with the committee when giving evidence on 2 May.

"We are concerned that at the time of the committee hearing, the CEO may have been in possession of an initial set of slides by IBM which provided initial views on the incident, and could, therefore, have shared more detail on this with the committee," he wrote.

With Pester due to make a second appearance in front of the Treasury committee on Wednesday, Bailey also questioned his earlier testimony that most TSB customers were able to access their online accounts, despite further reports of the system failing.

The FCA had previously been rumoured to be investigating the breach, but Bailey's letter confirms that is the case, and provides further detail around the FCA's specific concerns. It is currently focused on four areas: monitoring the fixes TSB and IBM are introducing to the system, that TSB deals with complaints in a fair manner, that it is open and transparent with customers, and to understand the bank's approach to addressing fraud.

The outage started on 20 April, when Sabadell sought to migrate TSB's IT systems from a rented system from former owner Lloyds, which it had continued to use after it split from Lloyds Banking Group. The bank informed customers that services would be disrupted for a weekend while customer data was moved from Lloyds' platform to its own, but the outage continued all week, affecting 1.9 million customers, and problems still persist more than a month later.

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."

01/05/2018: TSB boss to be quizzed by Treasury Committee

Executives from TSB and parent company Sabadell are to appear before MPs to respond to questions over an ongoing IT system outage that's now entered its second week.

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TSB chief executive Paul Pester, chairman Richard Meddings, and a representative from Spanish banking group Sabadell will all give evidence to the Treasury Select Committee on Wednesday.

The executives will be quizzed on what is being done to fix the issues that have disrupted some 1.9 million customers, leading to accounts and money transfers being blocked and, in some cases, displaying the account information of other customers.

Nicky Morgan, chair of the Treasury Select Committee, wrote to Pester on Tuesday 24 April demanding to know the extent of the failure, how long it was expected to last, and how TSB would act to compensate customers who had their sensitive data potentially breached.

In his response on Friday, Pester said he was "deeply sorry for the serious problems our customers have been experiencing" and that "no customer will be out of pocket as a consequence".

In the Treasury summons issued on Monday, Morgan said: "The Treasury Committee is extremely concerned by the problems at TSB, and by the apparent miscommunication to customers about the extent and nature of these problems."

"We will take evidence from TSB and Sabadell representatives to find out how they got into this mess, who is responsible, and how they are putting it right," added Morgan.

The sudden outage started when TSB attempted to move to a new IT system on 20 April, temporarily shutting down access while the migration happened. When the new system was turned on, customers reported login difficulties, as well as seeing data belonging to other users.

Pester stated that as of Friday 93% of customers attempting to access their online accounts were able to do so on their first login.

He added that TSB was "working around the clock to put things right for our customers".

30/04/2018: Now TSB warns of phishing attacks targeting customers

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Beleaguered bank TSB today warned customers suffering from its ongoing internet banking outage that cyber criminals are targeting them with phishing attacks.

Hackers pretending to be from TSB customer support are now trying to con frustrated customers out of their banking details, TSB confirmed, tweeting: "Customers have made us aware that they're receiving emails and tweets claiming to be from TSB. We would never ask you for your security details such as PIN or full password and we would only contact you via social media from our Official @TSB Twitter or Official Facebook page."

Customers responded angrily, with one, Rachael O'Brien, tweeting: "So not only have you taken our money there are now criminals pretending to be from your company .. taking more from customers ? .. nice one @TSB #thisisgoingtocostyou"

Criminals may be trying to take advantage of TSB's slow communications about the outage, with customers rushing to check their accounts are safe and payments are being made while they cannot access their funds via internet banking.

Analyst firm TechMarketView's research director, Peter Roe, said today: "The lack of a clear communications strategy only exacerbated the problem. No contact centre or website can cope with the tsunami of queries as account holders rush to ensure that their money is safe or, in many TSB cases, pay their staff or cover urgent bills.

"The management's slow and stuttering response will have appalled many TSB customers and staff. There is still much to do. For example, the TSB website at 8.40 this morning still showed a service status update from Saturday lunchtime, an age ago for a worried account holder."

Meanwhile, TSB warned that five in 10 customers remained unable to access their accounts online yesterday, as its internet banking disaster stretches into a 10th day.

"Internet banking is currently operating at around 50% of capacity," a bank spokesperson said yesterday. "For every ten customers who try to access our internet banking, five will be able to access this service."

The outage is now in its second week, with millions of customers not able to make payments online and facing problems with overdrafts and risking incurring fines, though CEO Paul Pester has vowed that no customer will be left out of pocket from the tech issues.

In its latest update, TSB claimed that direct debits and standing orders are working normally, but acknowledged customers are experiencing error messages when making payments online, urging any customers with such issues to call it. Incoming payments were working well "for most customers", it said on Facebook yesterday.

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"Customers should note down every time they're affected as evidence to ensure they receive what they're due," Gareth Shaw, money expert from Which?, told The Telegraph, though with claims being reviewed case-by-case there is no guarantee every customer will get compensation.

Pester announced last week that he was taking personal control of the situation, hiring IBM as a systems integrator to try to resolve the issues in migrating millions of customers' data from previous owner Lloyds' IT system to its own.

TSB's Spanish owner, Sabadell, had taken charge of the migration, even toasting an apparently successful completion hours before the problems began the weekend before last.

The migration was meant to save Sabadell 100 million a year that it was paying for TSB to rent a copy of its previous IT system from Lloyds.

HMRC said it would make allowances for small businesses banking with TSB that cannot make tax payments.

27/04/2018: TSB brings in IBM to help solve migration issues

TSB has enlisted the help of IBM to help it fix the online banking problems customers have been facing for the last week.

The IT giant will serve as a systems integrator, reporting directly to the company's CEO, Paul Pester, to identify and fix performance issues.

The issues, which began last Friday, began as TSB tried to move its five million customers and their 1.3 billion records onto a new IT system, as it was reportedly paying Lloyds 10 million a month to access its old IT system.

"As we moved over to our new banking platform last weekend, the landing was an incredibly bumpy one for our customers, and for that I am truly sorry," Pester said in a statement. "This is not the level of service that we pride ourselves on providing nor is it what our customers have come to expect from TSB.

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"Our teams continue to work around the clock to fix the problems that some of our customers are having in accessing their TSB accounts," Pester continued in a statement in the company's Q1 results report. "I want to reassure our customers that the engine room of the bank is working as it should.  This means that for the vast majority of our five million customers, everything is running smoothly."

While Pester earlier claimed on Twitter that everything seemed to be working, there are some major service issues that are extremely frustrating to customers. Namely, TSB was limiting the number who could log on at the same time.

TSB said it's waiving all overdraft fees and interest charges for both retail and small business customers for the whole of April.

Pester hasn't revealed when he expects systems to be back up and running, but the works have already overstretched the mark by five days. They were supposed to be completed on Sunday.

The FCA is reportedly investigating the outage, while UK data protection regulator the Information Commissioner's Office (ICO) has made enquiries after reports of customers seeing others' account details.

25/04/2018: Sixth day of outage sees TSB limit customer logins

Online banking services are still malfunctioning as TSB tries to rectify a huge IT system migration that has left customers without access to online banking for nearly a week.

Chief executive Paul Pester posted on Twitter that TSB's online services are now "up and running" this morning, but customers are still experiencing issues.

To keep the site from running too slowly, the company is limiting the number of people who can log in at one time, after users have had little to no access to their accounts for five days.

Nils Pratley, financial editor for The Guardian, suggested that the cost of using former owner Lloyds Bank's IT system pushed TSB to migrate too soon. The migration that started these issues was originally scheduled for November and delays were reportedly costing TSB over 10 million a month as it paid to use its old IT system from Lloyds.

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Despite this incentive, a TSB spokesperson said: "We would never rush if we didn't think we were ready."

Customers are still reporting a range of issues on Twitter and DownDetector, however. One customer got texts from the bank on Monday for two different account balances and was unable to deposit her cheque.

Another customer told the BBC: "I actually managed to log in to TSB internet banking this morning, but once in, it is so slow and when you switch pages, it just hangs. I have tried again and can't access anything now. It's a complete shambles."

As problems persist, Pester assured customers they would not have to pay penalties for any missed payments or other delays the outage has caused.

The FCA is reportedly communicating with TSB over the outage and UK data watchdog the Information Commissioner's Office is investigating after reports that some customers could see others' accounts, according to the Financial Times.

24/04/2018: Major TSB outage affecting 1.9m customers enters fifth day

A major outage affecting 1.9 million TSB customers has entered its fifth day following a botched IT upgrade over the weekend, with the bank's CEO apologising on Twitter earlier this morning.

TSB's online and mobile banking services have been taken offline on a temporary basis while the bank prepares to fix an outage caused after a major transfer of 1.3 billion customer records fell into chaos, with CEO Paul Pester publicly apologising on Twitter.

Pester said he was "deeply sorry" for the extended outage, caused by an upgrade that was due to take place from 4 pm Friday 20 April to 6 pm Sunday 22 April, but suggested there may be a fix later this afternoon.

TSB had been taking a phased approach to switching to its Spanish owners Sabadell's Proteo platform, which the bank unveiled in December, with the last push coming this weekend as the bank shut down services to migrate all customer data to the new platform.

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Pester said at the time that the new setup, dubbed Proteo4UK, would save TSB more than 100 million a year, as the bank had still been relying on Lloyds for its core banking software - provided on a hosted basis at a cost of 220 million a year.

"We're still seeing issues with access to our digital services. One of the steps we need to take to resolve this is to take our mobile app and online banking down for a few hours," Pester wrote on Twitter this morning.

"We'll be taking this offline and we hope to be back up later this afternoon. We'll let you know as soon as it's available again."

While customers have been complaining on social media about being unable to access their accounts either online or via the mobile app, regulators have waded into the crisis affecting the banking giant.

According to the Guardian, the Information Commissioner's Office (ICO) and the Financial Conduct Authority (FCA) are both looking into the problems, while the organisations retaining the power to fine TSB for the botched upgrade, and any potential data breaches.

TSB was acquired by Sabadell, the Spanish banking group, in March 2015 for 1.7 billion shortly after its separation from Lloyds Bank; the two organisations formerly known together as Lloyds TSB.

Speaking about networking within organisations, Russell Crampin, UK managing director of Axians, a company that specialises in IT infrastructure, warned many company's networks are already a "tangled mess of legacy technology", and that combining more than one network in the wake of a merger or acquisition can lead to serious issues. 

"In today's market, it is more important than ever to have a strong digital strategy in place to provide a fulfilling customer experience. But without a network that fully meets the needs of the business, this is akin to building a house on sand.

"Newly merged businesses should conduct a full assessment of their network, and if necessary, replace outdated legacy technology with a software-defined (SD-WAN) approach. By doing so, they can set a foundation for success rather than papering over the cracks of a poorly orchestrated network."

IT Pro approached TSB for comment, but the bank did not respond at the time of writing.

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