As RBS is fined for its 2012 computer failure, are IT meltdowns the biggest risk to banks?

Paul Thomalla, senior vice-president and managing director for Europe, the Middle East and Africa at ACI Worldwide, says Yes.

The antiquated IT infrastructure of many of our biggest financial institutions is a ticking time bomb. The payments community has been warning for years that it isn’t up to scratch, but retail banks have been like glaciers in their ability to change.

Many hold on to legacy systems inherited as part of M&A deals, with 40 or 50 payment systems they need to maintain and service. Most institutions are getting away with patching over ageing, creaking systems, and banks are frightened by the size and risk of the task.

But there are ways to upgrade IT infrastructure in bite-size chunks, minimising risks. It’s time to kill two birds with one stone: update the plumbing and put the customer at the centre of the bank. Modern banks need reliable IT systems. The industry must face up to this and cooperate on bringing payment infrastructure into the twenty-first century.

Richard McCarthy, UK head of banking at KPMG, says No.

IT risk is an important area that banks must tackle. However, it is part of a much wider challenge facing the sector.

As our last Bank Benchmarking report revealed, the UK banks’ 6.8 per cent return on equity still needs to rise above their real cost of capital, which currently stands at 12 per cent. Lower margins, massive conduct-related costs and much higher capital requirements have all contributed to a lower return in the sector in recent years. Consequently, this has reduced the resources banks have to re-focus their strategies on growth and improve their IT systems.

If banks are to boost their return on equity to above their cost of capital, their leadership teams must focus on creating ingrained cultures, systems and behaviours that will lead to great outcomes for customers and society as a whole. The tone at the top is already clear and true. Now, the challenge for the banks is to embed this all the way through their organisations.

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