RBS says IT issues could make it miss Williams & Glyn branch sale deadline

The Royal Bank of Scotland has warned that it could miss a deadline set by European regulators to spin off its 300-strong Williams & Glyn branch network because of technology issues.

The bank was ordered to dispose of the branches by the end of 2017 in exchange for its £45 million taxpayer bailout in the wake of the 2008 economic crisis.

However, in a statement, it now says that after "extensive analysis" it has concluded that there is a "significant risk" that the deadline will be missed.

"Due to the complexities of Williams & Glyn's customer and product mix, the programme to create a cloned [IT] banking platform continues to be very challenging and the timetable to achieve separation is uncertain."

The news means that the cost of the spin off is now likely to be "significantly greater" than the £1.2 billion already cited by the majority taxpayer-owned bank.

RBS is now "exploring alternative means to achieve separation and divestment" of the W&G network, which has around 1.4 million retail customers and 200,0000 small business clients.

This is not the first time that technology has got in the way of a deal for the branches; Santander agreed to buy them back in 2010 only to pull out the deal two years later, blaming IT integration costs and complications.

Shares in RBS - which reports its first quarter results on Friday - closed down 2.8%, at 244.8 pence, on the news.

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Comments: (3)

A Finextra member 29 April, 2016, 08:01

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At an very early stage of this divestment/separation programme, which is now over four years old and employs some 5000+ people, a suggestion was made why not buy a bank in a box ie latest technology, latest security etc etc and perform a data migration , but NO the grown ups in the bank decided to create a mini me of RBS which was doomed from the off, mind you no way RBS would create a challenger bank with a better start in life than it had, so think about all the outages and technical problems RBS has had and then shrink them into W&G. No wonder RBS is now putting out messages that the deadline might be missed.................. might have been easier and cheaper to give all the customers £500 each and say push off and find another bank.......

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A Finextra member 29 April, 2016, 10:54

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The complexity of the customer base, the product set and the myriad of UK and EU Regulatory requirements that this divestment must comply with will have severely constrained the bank's choice of divestment options. So, I do have some sympathy for the bank though I am sure with the benefit of hindsight, there are things they would have done differently.

With respect to the previous comment regarding paying everyone £500 and asking them to find another bank, it is quite simplistic. TCF (Treating Customers Fairly) will prevent the bank from doing that for a variety of reasons, e.g. customer's financial situation may have changed and they may not be able to get another account, some vulnerable customers may be incapable of getting another account and so on..

I wish the bank well in delivering this divestement as early as they realistically can so that both staff and customers can move on from this state of limbo.

If Brexit happens, then perhaps the whole thing will be may be called off as the UK will no longer be subject to EU regulations. WHo knows....

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A Finextra member 29 April, 2016, 10:55

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Worldpay took the opposite route when RBS sold them off in 2010. They decided to build a new technology platform to go live in October 2013 and yet in April 2016 the new platform's still not live. IT projects can over-run irrespective of the technology being used, and on-time delivery is not the same thing as success.

I assume that for W&G, "like for like replacement" was seen as an easier, quicker and lower risk strategy than migrating to a new platform. But even if it had been delivered on time, the project would still have failed to deliver a great customer experience, a platform for the future, or even a reliable service - and that failure should have been foreseen before the project was even initiated. Sacrificing key project benefits in a vain attempt to meet a deadline that ends up slipping anyway is madness.