back to article RBS IT cockup: This sort of thing can destroy a bank, normally

The thing you have to remember about banking is that it's a confidence trick. As with all such things, once the confidence is gone the trick no longer works. That's what should be worrying the executives at NatWest and RBS over the shambles in their computer systems this week. As to what actually caused the problems, I'm …

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  1. Anonymous Coward
    Anonymous Coward

    A shame

    that the population don't know all this. I hope it's not new to anyone on here though.

    1. Tim Worstal

      Re: A shame....hmmm.....

      I sorta hope some of it is new to at least a few people on here. For if not the editor and I have made something of a mistake in telling you what you all already know....

      1. frank ly Silver badge

        Re: A shame....hmmm.....

        It's nice to have it written down, for reference.

    2. johnnytruant

      Re: A shame

      New to me. I'm an IT guy, not a finance one. I like these kind of pieces El Reg do from time to time, they shed light on a world which is usually as baffling to me as the internals of my servers are to my boss.

      1. AdamWill

        Re: A shame

        Economics and finance are among those things where the more you learn about it, the more unhappy and confused you get. I don't know if this principle has been named yet, but it should be.

        1. Anonymous Coward
          Anonymous Coward

          Re: A shame

          A lot of the financial terminology is meant to be obscure and misunderstood by outsiders, because, if they understood it, they would try to put an end to it.

        2. Anonymous Coward
          Anonymous Coward

          Re: "the more you learn about it, the more unhappy and confused you get"

          "I don't know if this principle has been named yet, but it should be."

          Have a contrapositive: Ignorance is Bliss.

    3. Toastan Buttar
      FAIL

      Re: A shame

      I created a second bank account so that I had an autonomous 'pile of money' for my band. It meant we could take the proceeds from playing a gig and using it to contribute to pressing a run of CDs. None of this had an impact on my household bank account.

      Until, that is, my wife signed a cheque from the band cheque book to pay a household utility bill. And the bank cashed it, despite my wife's signature being a different name and shape from mine, WTF is the point of all this security info, if it is all just lip-service at the end of the day? Surely CAPTCHA technology is good enough to automate signature recognition?

      1. spiny norman

        Re: A shame

        My wife had a cheque bounced because the bank discovered all of a sudden that they didn't have a sample of her signature. They'd set the account up and happily paid out cheques for years before anyone noticed.

  2. Pete 2 Silver badge

    Single sourced

    What's more interesting than peoples' reticence to switch banks is their reluctance to have more than one current account. We know, some through experience and some through sage advice, that it's unwise to only have 1 front-door key or a single kidney. Sure, you can get by with just the one but having a spare is a good move. Come the day you really, really need that fallback, it's already too late to try to get one.

    As the article says, changing banks is easy. So is opening a new account. Having access to two sources of money (and maybe two separate credit cards - wallets do get lost, handbags do get stolen) is just as sensible - and it's free.

    Sure, you get double the amount of paperwork. But in these days of internet banking it's just another password, or security dongle, to keep track of. The upside is that you don't have all you eggs in the same basket. So a bit of "local difficulty" with one bank's inept IT doesn't turn an inconvenience into a crisis.

    1. J.G.Harston Silver badge

      Re: Single sourced

      "changing banks is easy. So is opening a new account."

      No it's not. My bank refused to let me open a new account until I'd either spent money buying a passport, or spent money getting a driving license.

      1. Tellymel
        Pirate

        Re: Single sourced

        " "changing banks is easy. So is opening a new account."

        No it's not. My bank refused to let me open a new account until I'd either spent money buying a passport, or spent money getting a driving license. "

        Mine also wouldn't let me change my address without licence(don't have) / passport (was out of date).

        The bank were however happy to register me for internet and telephone banking, & send details to old address, thereby giving control of my account to the strangers now living there. To help give them this idea the bank continued to send my statements to my old address until I finally acquired a passport (was too skint to renew at time so took a while)...

        1. Wize

          Re: Single sourced

          "...passport (was out of date)."

          Why do banks and the likes care that passports are out of date? Its not being used to travel and its still your face in the picture.

      2. spiny norman
        WTF?

        Re: Single sourced

        I have been with the same bank since 1978, used internet banking for many years, and regularly visit the local branch. I already have 4 accounts with them. Recently I decided to check if they had any better savings accounts I could sign up for on-line. But at the top of the screen was a big red banner saying they couldn't let me do that until I went into the branch with a utility bill to verify my identity.

    2. Antidisestablishmentarianist

      Re: Single sourced

      Not so easy. Some banks in some countries require that your salary goes into their account. But I guess according to your argument we should each have two jobs to handle this constraint and hedge against the risk of losing one of them?

      Nice idea though. I have 3 accounts spread over two different countries.

      1. James Micallef Silver badge
        Holmes

        Re: Single sourced

        True, to open an account you need some paperwork, typically photo ID and proof of address, and usually also documentation that shows where your income is coming from, such as work contract. In theory this is to prevent money-laundering, in practice, money-launderers know all about running small cash-based businesses, so it's mostly just paperwork.

        However no bank will close your account, once opened, even if your salary stops going in there. Firstly, it's none of the bank's business where my money is going to, and secondly they will be perfectly happy to have your account just sitting there unused. It's not costing them anything, and however tiny the amount in the balance, they are still making something off it. So just go and open a new account with a different bank, and transfer your direct salary deposit there, and keep your old account with your old bank. Believe me, no one at the old bank will even notice*

        * unless you're some hedge-fund manager or similair whose deposits are in 5 or 6 figures

      2. Stoneshop Silver badge

        Re: @Antidisestablishmentarianist Single sourced

        My current employer has the option to split your salary over two accounts: a fixed amount into one, the remainder into the other. Both banks thus see a regular flow of money, and are satisfied.

      3. Anonymous Coward
        Anonymous Coward

        Re: Single sourced

        I work for such a bank, and it's easy: Set up an automated transfer in internet banking the day after payday so that a set amount gets transferred out into your account in another institution.

      4. Mephistro Silver badge
        Flame

        Re: Single sourced

        "Some banks in some countries require that your salary goes into their account"

        In the countries where that happens, their Executive and Legislative branches are not doing their work nor fulfilling their obligations towards their citizens.*

        *Just like everywhere else. Sigh...

    3. Nigel 11
      Thumb Up

      Re: Single sourced

      Good advice, if you have savings.

      Trouble is that two overdrafts cost more than one overdraft, and there's an awful lot of people living one unexpected bill away from bankrupcy.

      Also if one bank suffered a CAUFU (which this was not), the effects would be systemic and (possibly) the whole UK banking system would be forced to a stop. Indeed, the whold global banking system might be forced to a stop.

    4. Anonymous Coward
      Anonymous Coward

      Re: Single sourced

      >changing banks is easy. So is opening a new account

      As an ex-pat you try going back to the UK and opening a bank account. You will need to prove you are not a terrorist nor a drug dealer and apparently the best way to do this is to provide a couple of utility bills in your name as these are things that terrorists nor drug dealers have any use for. Unfortunately neither do I.

      I have money in the UK and from time to time go back to move it from bank to bank and it's not so simple. Last time I got a cashiers check from one bank, took it to another and had to wait over an hour before they were satisfied everything was legitimate.

      Next time I go back to the UK I will be informing the bank in advance that I will be withdrawing everything in cash. I will then buy gold coins from various sources as buying too many in place means I am a terrorist or drug dealer. I'll the retire to my adopted country and wait for the Euro to fall.

      Did I mention the UKs obsession with terrorists and drug dealers.

      1. dotdavid
        Thumb Up

        Re: Single sourced

        The utility bill thing always baffled me; it would be trivial for any half-competent techie (not to mention a professional forger employed by one of the fearsome terrorists and drug dealers) to fake one using logos and whatnot procured from the interwebs. What exactly is the point?

        1. Christine Hedley

          Re: Single sourced

          "What exactly is the point?"

          The illusion of security: banks seem to be very keen on it. Cheaper than actual security, I suppose.

          1. James Micallef Silver badge

            Re: Single sourced

            Frankly, even providing a real bill with a fake name is probably trivial. I don't remember ever having to provide a copy of my passport to my utility provider, as far as they're concerned I could be called Raoul Duke, and I'd get a bill in that name, which then I could take to the bank etc etc. Of course that still requires a fake driving license or ID, but rumour has it that these can be found.

            But on the other hand, how else COULD you prove that you are who you say you are and that the money you are putting into the bank is legitimately yours? It's a flawed system, but it DOES minimise petty fraud, and large-scale fraud will, I think, always be with us since at some scale, the amount possible to defraud will be larger than the cost it takes to overcome the security.

        2. Keep Refrigerated
          Devil

          Re: Single sourced

          I've always used a digital copy of my utility bills, gimped blurred lines through the actual figures and account numbers... never had a copy presented like that refused. It occurred to me almost instantly I could simply substitute the address or other details on the bill. Costly signals, nothing more.

          OTOH I've changed bank account 3 times in the last 7 years and each time has not been easy at all (most recently last year). Even the new bank (who has incentive of a new customer) seems to fsck it up and play havoc with my direct debits. There's the law and then there's civil tort - unfortunately civil tort is a punishment to the victim in time and convenience as much as it should be to the fumbling bank.

        3. Anonymous Coward
          Anonymous Coward

          Re: Single sourced

          Yes - I have had to! My utility bills are either in my wiffs name or online. Wot wow we to do? Anon for obvious reasons.

        4. Dave Bell

          Re: Single sourced

          It's a habit.

          There is some set of rules, implementing some official guidance, and it included utility bills because they were once useful as a partial proof of ID.

          They're not so useful any more, but they are still on the list.

        5. Anonymous Coward
          Anonymous Coward

          Re: Single sourced

          Utility Bill is an interesting requirement. In theory you could quite happily forge your own without any effort. However, it might cause you more of a problem than you think if you do. I'm not saying the banks do this, but the following is all possible.

          1) Look at the account number on the utility bill. Ask the utility in question to confirm the existence of that customer and the address and name on the bill. Confirm the bills are paid and have been physically (for paper bills) sent to the address in question.

          2) Cross check all the utility information with records on the credit history. If the name is different in some way, add an AKA (I've seen misspellings of my name on a utility bill crop up on my credit report). Specifically cross check the address with the credit check that was done when you rented (or purchased) the property in question.

          Next, remember what the identity check is about. It is largely about anti money-laundering legislation (drug dealers and terrorists). If you open an account, things cross-check reasonably well with your credit report, and the account is used pretty normally (salary goes in once or twice a month; credit card, mobile phone, and other bills are paid; rent or mortgage is paid; cash is withdrawn for beers; etc.) then you won't hear another thing. If large payments are regularly moved into or out of account, or things look non-standard, the initial identity information you provided might be used in more detail to start an investigation.

          1. Anonymous Coward
            Anonymous Coward

            Re: Single sourced

            As far as I know it is a criminal offence in the UK to open a bank account with false details. Banks ask to see (and photocopy) your utility bills so that they have a record of you giving these details. This is helpful in any prosecution as it stops you claiming that the details were wrong because of a typing error etc.

          2. Phil Kingston Silver badge

            Re: Single sourced

            That would require the utilities to be able to disclose personal data which was gathered and is held for a totally different purpose.

            Possible, yes. Going to happen, no.

      2. Wize

        Re: Single sourced

        With all this electronic billing and online banking, who has paper bills these days?

      3. Aaron Em

        "Did I mention the UKs obsession with terrorists and drug dealers."

        Well, someone's got to bring money into the country, don't they?

      4. Primus Secundus Tertius Silver badge

        Re: Single sourced

        OK, it's difficult for you as an expat. But for me, British resident and domiciled, taxpayer-in-full (especially as a single person), it was not.

        My first UK bank fouled up a direct debit to the tune of £1000. So now they have just my direct debits and petty cash. I keep my main money "safe" at a second UK bank. It does mean I have two credit cards, so I use whichever has the furthest-away billing date.

        Because I am involved with various clubs and societies, I am "known" to all the UK banks, and could probably open more accounts. But two feels like enough.

      5. Hawknic

        Re: Single sourced

        Keep your expat account for a couple of months until you have proof of residence if you're moving back, otherwise just use your offshore account as normal. Not difficult at all. I used to transfer from account to account, currencies etc. without problems. Maybe you just chose the wrong bank (I was with Lloyds offshore, who are crap on many levels but clearly not this one) or the wrong country to move to.

        Pretty sure that a lot of the bureaugracy and process involved with money movements (which only apply to transfers of more than a few thousand, so not relevant for normal expenditure) are international rules not just the UK, and were in response to actual money laundering ignored by the banking system (see recent stories realting to HSBC and Nigerian dictators), so don't let your bank give someone else the blame.

    5. Lee Dowling Silver badge

      Re: Single sourced

      Opening a new account isn't that easy. First, you're assuming a perfect credit history. Banks aren't REQUIRED to let you open an account that actually does anything interesting (I know friends with UK doctorates who were sitting for years on "basic" accounts that didn't have so much as a debit card and being refused any sort of "normal" account - despite earning twice what I do). If you do want an account, that's a credit search more on your record. You probably won't get an overdraft on it (which can be a risk in itself if you're juggling accounts and can't remember which one actually has the money in). You'll probably be required (for any sort of interesting account features) to pay a monthly fee and/or pay your wages into it. Extra credit cards are, again, yet-another credit search on your history.

      That's before you get into the hassle of all that paperwork and management of two accounts. It's not as easy as you make out. In fact, I'd say MOVING your account entirely (to someone who will give you those more interesting features like A CARD YOU CAN USE ONLINE) is ten times easier. Hell, nowadays, they even move your direct debits etc. over for you and you don't have to do anything.

      I don't have a second account, not because I don't want one, but because almost certainly the expense and hassle of having one (even if I could get one) wouldn't be worth it. Much easier to just keep some emergency cash elsewhere, or have a credit card with another provider (even a pre-pay will do) should something go wrong.

      Banks *do* hold you hostage. Not by refusing to open an account, but by placing more demands on any decent, usable account (e.g. debit card, credit card, overdraft, monthly fee, etc.) to make them more hassle than they are worth for the once-in-a-lifetime bank outage like this one. Read the news. Basically the banks want the end of "free banking". And they are already starting to do it as much as they can. That means that having a second account is actually an extra expense that isn't justified by being able to have another bank account - it's just easier to get a credit card from someone else or store a small amount of cash elsewhere.

      1. James Micallef Silver badge

        Re: Single sourced

        "Basically the banks want the end of "free banking"."

        That's one of the huge elephants in the room right there. Banks already make money from every account, simply because they don't pay interest on it (or a miserly amount on a savings account), and then they loan that out for anything from 3-6 %age points more. With more and more automation, e-banking, mobile banking etc, combined with closing of branches (not to mention offshoring of jobs), banks' costs are actually going down. But they reckon if they ALL introduce a small fee to give you an account, then the customer won't switch banks.

        Reality is that the relentless drive for profit is whet drives a lot of big corporations. Now, don't get me wrong, I consider myself a capitalist and believe in the markets driving forward progress and prosperity... BUT the markets always operated before in an environment where care for the customers was taken into account (also because of localised location of businesses, they were forced to some extent to have good customer care). Nowadays the priorities seem to go thus:

        1) shareholders*

        2) top executives

        998) customers

        999) workers

        Of course, I exaggerate... but the point is, banks are making money from my deposits, they should be competing to offer me the best rates, but instead they are competing to screw as much money as they can from customers while cutting costs (and therefore services), all the while that top executive pay reportedly keeps on rising. So clearly teh 'free market' is not working in this case.

        Even this structure is skewed in some fruity and socially-minded tech companies that sell stock without voting rights attached,

        1. Anonymous Coward
          Anonymous Coward

          Re: Single sourced

          "Basically the banks want the end of "free banking"."

          Everyone seems to have forgotten that the banks pushed the government to move all benefit payments away from things like pension books and cheques cashed at post offices. The penalty was a law that requires banks to offer a no-frills bank account for those on benefits, with no bank charges, no overdrafts, no insurance products, etc. All of the banks hide these in the product listings on their websites and will actively discourage anyone from opening a no frills account but they all have them. These basic accounts are easy to open but still require two proofs of ID (one for you and one for your UK address). I switched to one of these from an offshore account to have FSCS protection and avoid bank charges.

    6. Nigel 11
      Meh

      Re: Single sourced

      I've always wondered why nature gave us redundant kidneys, very considerable distributed redundancy in our livers and brains, but only the one heart.

    7. Anonymous Coward
      Anonymous Coward

      Re: Single sourced

      changing banks is easy. So is opening a new account.

      quite. Having more than one account is not difficult. Changing which one receives the maoin income from time to time is not difficult. Nor is changing standing orders. If you must use direct debit, that can be changed too. So why does anyone find it difficult to change banks. I have three on the go at the moment.

    8. Zack Mollusc
      WTF?

      Re: Changing banks is easy.

      I tried to move to the Gnatwest when I moved house to within 50 yards of their branch. Went in, nobody could be arsed to see me, 'fill in this form and we will contact you with an appointment' , filled in the form and am still waiting after 5 years.

      The Mrs went through the same procedure a few weeks later. She is still waiting for an appointment although she did ring them a couple of times and called in. Nobody was interested and nobody could find any record of the previous visits.

      Brother-in-law wanted to open an account (different bank), went in with bag full of money, passport, driving license, mortgage paperwork etc. Nobody was interested. "Ring us and make an appointment".

      Changing banks is hard.

  3. Anonymous Coward
    Anonymous Coward

    Hmm...

    Just worth pointing out: Fred Goodwin would never have offshored. In fact, he stopped NatWest offshoring their call centres after the RBS purchase. The new lot, put in by the government, slashed charitable giving and pensions and started moving offshore like it was going out of fashion. The then government and the current government didn't seem to have a problem with a UK tax payer bailed out bank making UK tax payers redundant, in favour of offshore jobs.

    1. Anonymous IV
      Unhappy

      Re: Hmm...

      So that's one good thing about Fred Goodwin. I doubt there is more than one.

    2. Ye Gads

      Re: Hmm...

      Nope.

      RBS started offshoring its investment bank in 2006.

      RBS closed its final salary pension to all new employees in 2007.

      What the new lot have done is followed the same policies, only more so. Moving some stuff offshore is probably not a bad idea (Helpdesk, legacy internal business apps, etc) - shipping off core bank functionality is not so good.

    3. This post has been deleted by its author

    4. Anonymous Coward
      Anonymous Coward

      Re: Hmm...

      Actually, following on from the ABN Amro purchase, just before everything went wrong and still under his leadership, the plan was going to be to merge a large proportion of the UK (core business) back office functions with ABNs. Conveniently these had already been offshored to the lowest bidder. That was the point where I got out so I'm not sure what happened to that idea after the shit started hitting the fan.

    5. Anonymous Coward
      Anonymous Coward

      Re: Hmm...

      He outsourced like a b**ch though... complete with reducing costs every year to the point of stupidity.

      And fire-rehire every year to evade employment regs.

      Considering people were the main costs. Obviious what was going to happen in the end Unpaid overtime, anyone?

  4. TheOtherHobbes

    It's amazing

    that so few people understand what banks *really* do.

    Banks do not loan out the money punters save. Banks actually borrow cash from the money markets and/or the local Central (i.e. national) Bank and/or other banks at low rates, and lend it out at higher rates.

    But banks also speculate. It wasn't always thus - until fairly recently retail and speculative banking were kept strictly separate.

    Then - after industry lobbying - we had deregulation, and now they're not so separate.

    This is very, very bad. It means that when a bank makes a huge loss on its speculation, the money that punters have saved - which is a relatively small percentage of the bank's balance sheet - isn't firewalled. So it has to be guaranteed by the government.

    Or in other words, ultimately taxpayers guarantee their own money. (And good luck with *that.*)

    Banks do have some nominal reserve requirements. They're supposed to always keep some cash in hand and/or deposited with the Central Bank, just in case. The theory is that when money is loaned out, there's always some small reserve against it.

    Now - who wants to guess what the reserve requirement is in the UK?

    No idea? Okay - it's nuffink. Zero. Fuck all. It's officially a *voluntary* requirement (if you can get your head around that bit of nonsense.)

    There is *no* obligation on banks in the UK to keep any reserve at all.

    So when something bad happens, all the banks look at their own 'assets', realise they have a gigantic worthless shitpile of failed investments and worthless loans, and stop lending to each other - because they know the other banks are in the same boat.

    And suddenly, 2008. And possibly 2012 too.

    What is to be done? Osborne is making noises about splitting retail and speculative banking again. Which is a start.

    But really, the whole system is completely insane.

    In any case, the real role of banks isn't lending, it's risk analysis. Good Keynesians know - empirically - that throwing cash at a stuck economy can unstick it. The cash can be made out of thin air, just like all cash is. But it needs someone in charge to say 'Let's do this.'

    All banks ever do is decide which projects and activities are 'viable' and which aren't. But banks are hardly unbiased - q.v. Farepack - and they're not only a danger to everyone, they're also a danger to themselves.

    So - take them out and shoot them. Go back to boring high street banking, close the casino, and spend the saved money on useful things - because casino speculation is always, with absolute reliability, ruinous to any functioning economy.

    1. william 10

      Re: It's amazing

      Sort of, money deposited in Banks is is one of the forms of collateral used by the banks for their borrow.

      The Banks most affected by the current downturn often turn out to be those that took advantage of Mr Browns relaxing of the reserve/capital requirements as his assertion that he had "ended boom and bust" not understanding he had created "boom and depression". This allowed the Banks to borrow more against their Tier 1 Capital, depriving them of the reserves need to survive a downturn.

      Please note it's Tax Payers that elect governments and it's governments that create and police the rules. So tax payers made the mistake of electing a government that was clearly losing control of spending and our now paying the price for this. We the voters must take responsibility of our part in this.

      The current financial crises was created in Downing Street by Mr Brown.

      1. John H Woods Silver badge
        Unhappy

        Re: It's amazing

        "We the voters must take responsibility of our part in this"

        What - because we are too gutless to start an armed insurrection? Democracy - certainly as practiced in the UK - does not give you anything like the fine-grained control we need to prevent this sort of behaviour.

        1) Politicians are not bound to stick to manifesto promises - in fact, they are almost bound not to.

        2) Politicians are increasingly self (career) oriented, rather than state and/or society oriented.

        3) The FPP system restricts the choice of government to two parties, both of which behave similarly in this respect.

        I could go on. I believe in free-market capitalism, though I admit to being a bit of a small-L liberal. The problem we have had is that we will allow industry (e.g. 1970s British car industry) to go to well deserved oblivion, then we distort the market by preventing the banks from doing the same. This prevents them from doing proper risk analysis, because it us who bear all the risk, despite the fact we have no real means of relieving ourselves of the burden of doing so - nobody we can realistically elect will allow us to.

      2. NogginTheNog
        FAIL

        Re: It's amazing

        "Please note it's Tax Payers that elect governments"

        The problem with this, and pretty much everything run by our 'electoral' system is that thanks to safe seats and First Past The Post it's a surprisingly small number of tax payers who do actually elect governments. The rest of us just piss our vote away every 4 years.

    2. The Axe

      Re: It's amazing

      But wasn't the banking collapse due to all those bad mortgages and not down to bad speculation? In which case splitting the banks into two won't have fixed the previous problems. It was the boring banking bit which caused the problems.

      1. william 10

        Re: It's amazing

        Again sort off, if you have borrowed loads of money you need to get it to work - due to the volumes you have (only allowed because of the relaxed collateral requirements on Banks) you are forced to relax your lending requirements (i.e. removing the need for deposits etc....).

        Then other Banks find it cheaper to borrow short term (six months or less) than long term but they use this money to provide long terms loans (Northern Rock) - this would be fine if you had sufficient collateral but Mr Brown had relaxed the rules on collateral and stopped proper regulation of the banks (See no evil Hear no evil the labour way to regulation).

        The Bank Regulations should be there to protect people, the assumption should be that Bankers work for the good of themselves not the country and Mr Goodwin is a classic example of the this (Please note Mr Goodwin is an exception not the rule, most bankers try to be good), we need to find the bad ones before the economy is damaged .

      2. Ledswinger Silver badge

        Re: It's amazing @The Axe

        "But wasn't the banking collapse due to all those bad mortgages and not down to bad speculation? In which case splitting the banks into two won't have fixed the previous problems. It was the boring banking bit which caused the problems."

        Yes and no. Much of the Big Financial Collapse that wiped out the investment banks was not caused per se by bad lending, but because the investment bank speculators created dodgy financial products called Collateralised Debt Obligations, that pooled large numbers of high risk loans and then split the resulting pool into different slices of risk and returns that could be profitably sold left right and centre. I have a brillant cartoon explanation of all this, not sure how I can send it to you! Anyway, those self same investment banks sat on the dodgiest, highest returning slices until they went pop, in part because they were in denial about the risks, in part because they wanted the high returns, and in largest part because the lowest ranking tranches were unsaleable. Admittedly the US retail banks that made the orginal NINJA loans (No Income, No Job or Assets) were part of the problem (in part because the US government strong-armed retail banks to lend in neighbourhoods where a prudent bank manager would only be seen dead - in all senses), but the financial engineering by the Wall Street investment banks concentrated the risk many times over in certain places. Like the basement of Lehman Brothers, or Bear Stearns.

        As per the article, Northern Rock did have some unsavoury loans, it could have coped, but for the short term funding against long term assets. Even that wouldn't have come unstuck but for the global confidence crisis caused by the nuclear explosion of all the CDOs and related derivatives as mentioend above. So within the UK we've had and suffered the consequences of some CDO's and related derivatives. But we've had a homegrown crisis that is rather different, and in addition to the liquidity problems of Northern Rock, B&B et al. Much of our domestic bad debt problem has been essentially speculative business lending by the likes of RBS, whose thirst in the period 2002-2007 for what is called syndicated lending (often to private equity acqusitions) meant that it leant vast sums of money to unsustainable businesses across Europe. This enabled it to earn fat commissions as lead arranger for such syndicates, with hapless other banks sold chunks of the debt as well if they weren't careful. Combine this domestic greed and bad judgement with the international exposure to the US originated CDO's and you have the bad debt problems that meant we had to bail them out. So it wasn't the bread and butter commercial banking that caused the UK problems, but City based investment banking, based on piling debt into businesses that couldn't afford it in the long term, hoping that they could sell it on before it all went pear shaped. RBS then compounded this by some very unsavoury practices which are outlined in this link, some of which I've seen from the inside of an affected company:

        http://www.huffingtonpost.co.uk/ian-fraser/rbs-fraud-accusations-of-systemic-i_b_1579968.html

        So I'd argue that it was only in small part that the boring bits that caused the problem, and largely the exciting, well paid yuppie bits, who also greatly exacerbated the bits they didn't cause directly.

      3. James Micallef Silver badge
        Boffin

        Re: It's amazing

        Not true, really. It was the investment banking bits that decided that by packaging up mortgages from the retail banking in bundles they could sell them on as investments. At that point the investment banking was telling the retail banking [*] "Just get us more of this stuff so we can sell", the retail banks protested "but there are no more credit-worthy people to give mortgages to", and were overruled by "not to worry, loan the money to credit risks, we can hide the risk inside complexity, and anyway the house prices will keep going up indefinitely"... and the rest, as they say, is history.

        In short if retail and investment banking had been kept separate, the retail banks would never have issued the subprime mortgages in the first place

        *paraphrased for dramatic effect

      4. Double Dip

        Re: It's amazing

        @ The Axe 11:09

        Thats what you are lead to believe. Far, from it. Those mortgages became useful to bundle into CDOs (collateralised debt obligations), CDSs (credit default swaps) and other SIVs structured investment vehicles.

        The best analogy is a race horse. Joe says to Fred I bet you that the horse will win. David hears this and says to Sandra, I bet you Joe doesn't pay Fred if the horse wins. Sheila hears of the deal and says to Bob I bet you David doesn't pay Sandra. At some point you can even have Joe doing a deal with Sheila! This is why you may have heard in some media (even Radio 4 covered it) banks didn't even know how exposed they were to sub prime mortgages CDS etc.

        Back to the mortgages - They basically became part of a portfolio where you deal on the future income and treat them as assets but the problem is that these portfolios can themselves also become bundled into other packages:

        http://en.wikipedia.org/wiki/Hypothecation

        . . . . which is then re-hypothecated. That is the reason why liar loans, became so popular. That is the reason finance companies would actually lie on your behalf, even if you didn't want them to. There are cases where a 60 year old mechanic was earning $250,000 a year etc etc. Problems were all pointed out to the governments and leading finance companies but the irony is that even chiefs that hated these models had to become involved or they would have been consumed by the companies that were abusing CDSs etc.

        These packages became so complex because they were all bundled and placed into tranches of varying risk (some risky mortgages added to some safe mortgages, loans etc etc), these could then be re bundled. To figure out what was actually inside one of these bundles you would have to track back across huge numbers of 'spagetti transactions'. The rating agencies were intimidated by the finance companies who were out of their depth in assessing the real risk anyway so they just stamped them with triple A rating. If the SEC does start to cause problems then you create a branch in London which covers the insurance requirements and that keeps SEC happy.

        Politically all was fine as the American Gov scored huge points with home ownership. The players just needed to keep issuing the money - FYI debt is created BEFORE the money is created.

        Imagine paying rent in America and living in poverty (+ virtually no education) somebody knocks on your door and says look at the trend for property prices, we give you the money to buy this place, no deposit, nothing we do all the work and you just sign the dotted line. In just 2 years time you will be looking at approx 10s of thousand of dollars. These people signed up by the thousands, everybody is happy. Like all ponzis it will burst.

        This is interesting and has also been placed on the gov Library in September 2008:

        http://gregpytel.blogspot.co.uk/

        Be sure to read the link from the above site to:

        http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/144/144w254.htm

        Have fun folks, the sh*t still has not hit the fan, . . . . .

    3. Destroy All Monsters Silver badge
      Pint

      Re: It's amazing

      Mr. Worstall may be bored to death by one of the most fundamental questions of the economy (sort of like being bored to death by blood in your urine), but it's fascinating nevertheless.

      http://mises.org/daily/4817/Economic-Recessions-Banking-Reform-and-the-Future-of-Capitalism

      "I would like to start off by stressing the following important idea: all the financial and economic problems we are struggling with today are the result, in one way or another, of something that happened precisely in this country on July 19, 1844. What happened on that fateful day that has conditioned up to the present time the financial and economic evolution of the whole world? On that date, Peel's bank act was enacted after years of debate between Banking and Currency School theorists on the true causes of the artificial economic booms and the subsequent financial crises that had been affecting England especially since the beginning of the Industrial Revolution."

    4. BristolBachelor Gold badge

      Re: It's amazing

      I thought that what happened was that banks borrowed the money and lent it. They convinced someone that the IOU they got from the borrower was as good as money and lent that too (is that what Tim meant about creating money out of thin air?).

      1. AdamWill

        Re: It's amazing

        To make it very simple (it's much more complex these days), if we entirely ignore all the other complicated factors, banks are allowed to lend out some multiple of the amount of money that is deposited into them by customers. This is what is referred to as 'creating money out of thin air'. By some, anyhow.

        Tim's point (I think) is that arguing about it tends to bring out a lot of complete whackjobs (especially American whackjobs - it's one of those areas where this is a whole sub-genre of American whackjobs with creative legal theories which ultimately mean they don't have to pay any taxes...) and send the debate utterly off the rails, and it is in fact irrelevant to his argument: even without the system, even when banks are/were allowed to lend out only the money that was deposited into them, the confidence problem happened. Even if a bank actually has assets to cover all its liabilities, it's hardly good news for a bank if all its customers show up at once and demand all their money back. Even if it can oblige them all, it's not going to be a healthy-looking business the next day, and all those staff still need paying. All the other complicating factors in modern finance muddy the waters even more, of course, and make reserve requirements even less important than the whackjobs tend to suggest.

    5. James Micallef Silver badge
      Thumb Up

      Re: It's amazing

      "Go back to boring high street banking, close the casino"

      What he said

  5. Tom 7 Silver badge

    Dont worry its all insured

    by the taxpayer.

    "Sure, your or my account might have £5 in it: but on average over all of the bank accounts in the country one estimate has it that this float earns the banks £20 billion a year." Where'd that £50 billion go?

    Its not the banks that you have to worry about - the powers that be will sacrifice the world economies before they'll let the banks fail.

  6. Nigel 11
    Mushroom

    Too big to fail

    It's another manifestation of the too-big-to-fail problem. Indeed if a majority of RBS's customers jump ship, then we've just gone from the big five to the big four and are just four more f**k-ups away from the big Zero. Gulp.

    The answer might be for RBS to set up a new wholly-owned subsidiary with brand new state-of-the-art IT systems. Keep the fact that it is wholly-owned as quiet as possible. Milk exising customers for all they are worth (what's new?) while hoping that they jump ship to the new bank, along with disgruntled customers of their competitors.

    Retailers and consumer-product manufacturers are forever doing this. Think Pepsico just makes Cola - probably not, but can you name all their brands?

    1. Anonymous Coward
      Anonymous Coward

      Re: Too big to fail

      Heresy!

      As someone that used to earn a crust occasionally biking computer tapes (think fat pizza boxes, four at a time on a busy day) between Natwest branches and a local HQ five times a day, any revision to the computer systems will put loads of outsourced labour out of work. Down with this sort of thing I say.

  7. Yamal Dodgy Data
    Alert

    It seems entire nation is waiting for El Reg readers to tell them whats going on

    Tim Worstall: "I'm reading El Reg to find out myself ....The general view of Reg readers seems .... "

    I've never seen so many El Reg readers comments copy pasted into mainstream media news sites,

    which makes sense because RBS are telling the public f**k-all.

    What I'd like to know is how can the single most catastrophic f**k up the banking sector has ever seen in the first world be called simply a "glitch" by the RBS/NatWest PR bimbo ?

    The banking sector has been dependent on IT systems for the last 40 years and never has there been a downtime lasting a week.

    In fact the typical 4 to 24 hour screw ups were now getting used to have only started happening since banks have started outsourcing.

    C'mon Reg readers (especially you mainframe old fart readers)..

    60 million Britons want to know whats going on.

    1. Anonymous Coward
      Anonymous Coward

      Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

      >The banking sector has been dependent on IT systems for the last 40 years and never has there been a downtime lasting a week.

      They are probably trying to migrate from VMS to UNIX

      1. BernardL

        Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

        I used to work in the nondescript data centre next to NatWest's unmarked data centre in an undisclosed North London suburb. They had two VMSclusters in that building, on separate floors. IIRC, the live cluster had 9 nodes in it, the hot standby had 8 nodes or so.

        They're probably trying to migrate from VMS to some cloudy/JSP/.NET/web2.0/Ruby shite, developed in and remotely managed from somewhere on the other side of the world that they could exploit as cheaply as possible. UNIX/linux can be made fairly reliable, they just need a bit of work.

        When it absolutely, positively has to work - and keep working - VMS can't be beat. Even now, despite HP trying to kill it through neglect. Bastards.

        1. Anonymous Coward
          Anonymous Coward

          Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

          Oh! Yah! Let's get some SFAAASHITAASIAASFAASSFA SOA!

          I really miss VMS. It just never failed. Engineering. That's what it was. Engineering verus witchcraft.

          Alas, being unable to sell their product, Kernighan and Ritchie, Straustrup, and all the other "Peace, Love, Dope" crowd at the Berkeley campus and various other places, had to give it away for free. It's amazing how such shit makes it in this business, by virtue of being crap and hence appealing to the nature of people who liked to fixed things in their command centres in their basements.

          Now the banks are in the hands of "Enterprise Architects" who learned their trade from a book, which was written to solve the problem of how to make the authors richer.

    2. dotdavid

      Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

      My guess is because it was someone important's fault, or the usual scapegoats have all been made redundant already.

    3. Anonymous Coward
      Anonymous Coward

      Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

      A reliable source tells me a terminating resistor fell off their coax network and the cleaners vacuumed it up. The whole IT department is going through hoover bags looking for it.

      1. Fatman Silver badge

        Re: "Terminating resistor"

        Our network people had a good laugh at that one; and we needed it.

        Currently we are reviewing our DR plans in case `Debby decides to do (in) Florida`.

        That "fan" has not shut down yet, and it still could fling a lot of shit our way.

    4. sugerbear

      Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

      Ex RBS here. From what I hear (Allegedly) it was an upgrade to CA7 that someone screwed up. CA7 is a bit of software that runs your batch jobs and allows you to add dependencies and start jobs to a stream of batch programs. If you fo' that up you effectively stop your bank working.

      Now given that there hasn't been anything similar in the past 20 years at Natwest (which used OPC but lets not get bogged down in detail, they both ran big mainframe shops, Natwest much bigger and RBS didn't have the resource to complete the migration on their own) you can either guess that BMC left a bug in CA7 that only occured in when RBS ran the sofware and had failed to be picked up anywhere else on the plant.... or... someone who didn't know what they are doing cocked it up.

      And of course RBS are not going to admit (even if it were true *cough*) that this is linked to the IT cost saving programmes that started around 2008 was in any way linked to what happened.

      Repeat after me. All IT outsourcing (offshoring) deals save money and have zero impact on your business (tm).

      1. Anonymous Coward
        Anonymous Coward

        Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

        More ex-RBS here, the above sounds about right. It's shocking how much critical infrastructure support has been outsourced/offshored. The offshore resources are by far the worst, some of them are barely technically skilled and rely on scripts which were produced by the people who actually understood things but are long gone. The outsourced ones are in some cases far better, as they were a case of staff being moved to the outsourcing provider, so little in real terms has changed aside from the bank giving someone else (eg Accenture) money to give to the same people they employed in the first place.

        I hope other institutions can learn from these mistakes.

    5. Hermes Conran
      Mushroom

      Re: It seems entire nation is waiting for El Reg readers to tell them whats going on

      What happened was almost certainly a simple change to the overnight batch run. Not properly tested before implementation and caused a problem that was not caught before the end of the run. The batch run completed and the online systems were brought up for the next day and then the problem was spotted. You then have to back out the online transactions, back out the batch run back out the change, rerun the batch, reapply the online transactions. Unfortunately the overnight batch takes all night to run and doing all that other stuff is time intensive too. This problem stems from the RBS takeover of Natwest, RBS (small bank) management says "why the hell does this mainframe stuff take so long and cost so much?" Natwest management say "Well it's all the testing and expensive mainframe staff" RBS management look to India and thinks hmm......

  8. Anonymous Coward
    Anonymous Coward

    The problem with moving your bank account is that -

    - you'd have to move it to another bank.

    One that won't go bust? One that won't have IT cock-ups? That's a very short list (zero items)

    Mind you, this is all a lot of fuss about a payment systems glitch. Shit happens, it's just that we are normally better at covering it up.

  9. dotdavid
    Facepalm

    "It's a strange but true fact that while moving an account is quite easy (it's easier than moving house – yet people move house more often than banks), very few people actually do. The stickiness of personal banking is observable but not really explainable by standard economic theory"

    Personally, the reason I don't switch banks is because I did it once before and for all its' faults my old bank turned out to be better than my new one. Fortunately I hadn't completely cancelled the account (just moved my direct debits and salary payments across) so I just moved them all back.

    Since then I've basically been immune to all banks' branding as I figure they've all got dirty secrets that only customers have the misfortune of finding out.

  10. Walter Ramekin
    Unhappy

    One tactic

    ... is to stick with banks which have not merged (at least not for several years). I've managed accounts with maybe 25 institutions in the past decade, and HBOS and RBS/NatWest are two shining/stinking examples: the vast majority of problems can be traced back (eventually) to inter-system incompatibility (not just IT: HR, training, paperwork, everything).

    This *especially* applies to accounts for ex-pats and Power of Attorney, but increasingly affects "ordinary folk". Phone banking and internet banking are sometimes more problem-prone than branch, but not always.

    I've also noticed an increasing trend for phone banking staff, when presented with virtually any issue, to trot out a default response of "you'll have to visit your branch". Whereas the previous trend in reverse was probably a corporate mandate ("reduce branch staffing, get customers to sort their problems online or using cheap callcentres") now I feel it's resignation or desperation on the part of the call centres ("our systems are broken and we don't understand them so we can't fix problems, and we don't have the time anyway, so push the problem/customer back to the branch, even though we doubt they can help").

    Not good. Not good at all.

    1. Nigel 11

      Re: One tactic

      So that's HSBC or Barclays, then?

      1. Anonymous Coward
        Anonymous Coward

        Re: One tactic

        HSBC Merged with Midland to get most of their UK customers.

        1. Nigel 11
          Meh

          Re: One tactic

          I know, but the HSBC - Midland merger was over 20 years ago. Also prior to that HSBC had no UK retail banking operation, so I doubt there was a merger/ transfer of IT systems at the customer end, just a takeover of the management end.

          1. Horned-Devil

            Re: One tactic

            In fairness - it looks a lot from dealing with HSBC commercially that they have essentially just rebranded it and probably not touched a lot of the bank end. The IBAN still refers to Midland and if you try and deal with them globally you quickly see that the different countries HSBC banks don't talk with each either systematically (or commercially) so I think they could well be untouched from an IT systems perspective

            1. Anonymous Coward
              Anonymous Coward

              Re: One tactic

              @Horned-Devil: Yep. In fact I think the only area where HSBC interacts in different countries is in the Premier Banking part which is entirely new.

          2. Anonymous Coward
            Anonymous Coward

            Re: One tactic

            The merger may have been over 20 years ago but the international code for an account still starts with 'MIDL'.

        2. durandal

          Re: One tactic

          And Barclays hoovered up the Woolwich. Granted, the latter only had about ten account holders, but the principle still stands.

    2. Pete the not so great
      Happy

      Re: One tactic

      I once went into a HSBC branch to sort out a credit card limit increase, the guy helpfully phoned India for me.

      Branches these days are pension selling retail points and some cash machines.

      I use HSBC's First Direct.

  11. Anonymous Coward
    Anonymous Coward

    Natwest have had a pretty bad image for a while, hence all this Helpful Banking campaign.

    The icing on the cake for me was last year, when they told me that I'd never used online banking before, despite having using since 2002, denied all knowledge of it ever existing and had to make me a new account. That was my second clue, the first being only supporting Internet Explorer as the 'secure' browser, kicking everyone else out.

    I'm just waiting for the Metro Bank in Reading to be finished, much more convenient for me and can't realistically be any worse than Natwest, who at one point used to flag every transaction I made over £100 as fraud, and then not tell you about it until you try to buy something some other time.

    1. Lee Dowling Silver badge

      I left NatWest years ago when they first introduced their Online Banking. It was IE-only, needed ActiveX controls (so you couldn't even fake it) and it was a heap of junk.

      Out of principle, I refused to use it, complain via their contact section (they sent a politely worded "No" to my request to allow Opera or at least some Netscape-browser to access it) and moved my account. That one, sole reason actually cost them my account. They probably didn't care at all.

      A bank that FORCES me to use IE (and accepted IE6 usage!) shouldn't be handling my money, or anyone else's. Simple as that.

      1. Burkhard Kloss

        To be fair to them, they've fixed that particular problem long ago, and i can do my online banking from my linux boxes.

  12. Anonymous Coward
    Anonymous Coward

    I feel like writing a stiff letter of complaint to Natwest, multiple times, and charging them £40 for each copy

    The helpful bank

  13. Graham Marsden

    "how many of those customers are sufficiently pissed off to move?"

    I've looked at this and, because of the way I organise my finances, there's really no benefit for me to move from Nat West to any other bank as there's nothing to stop them having a similar cock-up in the future.

    Ok, it was a PITA when I only had £15 in my wallet and couldn't get any more cash out, but it wasn't an absolute disaster. Yes, I could set up a second, back-up, account and leave some money in there, but it would be doing sod all (and earning sod all interest!) and it's not worth doing just in case my main bank (whichever it may be) goes tits up again.

    1. Nigel 11
      Meh

      Re: "how many of those customers are sufficiently pissed off to move?"

      Ever since I had savings, I always took the attitude that I should never keep them with any institution from which I had borrowed money or even with which I had a credit agreement. If you look at the T&Cs, they reserve the right to help themselves to your savings ("offset") if you're deemed to be in breach of your borrowing agreement. Who knows what definition of "in breach" is programmed into their computers? I wonder if even the banks do?

      I felt this particularly strongly while I had a mortgage. If things had ever gone tits-up outside my control, the bank could not have siezed my savings without first getting a court order (which in practice would have meant bankrupcy proceedings).

      You're probably right about moving your account being pointless. A bunch of tenners cached somewhere in your home is probably a better idea.

    2. Brewster's Angle Grinder Silver badge

      Re: "how many of those customers are sufficiently pissed off to move?"

      And they might now invest in IT, reducing the chance of a another cock up.

      1. Fatman Silver badge

        Re: they might now invest in IT

        Are you fucking NUTS!!!

        "Invest in IT"???

        That can not happen - it does not `increase shareholder value`!!!!

        Manglement that thinks like that after such a disaster should be taken out, drawn and quartered.

        </sarcasm>

    3. Ledswinger Silver badge

      @Graham Marsden

      "I've looked at this and, because of the way I organise my finances, there's really no benefit for me to move from Nat West to any other bank as there's nothing to stop them having a similar cock-up in the future."

      You don't think that RBS have shown themselves to be systematically incompetent in almost every respect? Bailed out by the state because of their inept business lending and corporate speculating, accused of fraudulent practices at their own AGM, persistently in the public eye for big bonuses accompanied by inadequate financial performance, and now extending their ineptitude to their retail customers. And just to add insult to injury, they're going to transfer a load of their happy customers to Santander, widely seen (until now) as Britain's worst bank for customer service.

      I respect your right to decide to stay with Natwest, but don't you think that there is a fairly strong trend here? I've never looked back since I moved from RBS to Nationwide, who I'm sure have their own tribulations. The trigger for me was the dishonest behaviour of RBS corporate banking arm, and I now have an essentially dormant RBS account, kept open only because it costs them a few quid each year (like a few other commentards, I see).

      On the basis that RBS/Gnatwest seem to be able to make any situation worse, I'd have thought there was a specific and real risk of staying with them. OK so they're state owned, but any bank gets bailed out these days (plus the FCS covers all high street banks of any scale), so surely better to be with somebody who doesn't quite have the stench of failure hanging around them quite so pervasively?

      1. Vic

        Re: @Graham Marsden

        > Santander, widely seen (until now) as Britain's worst bank for customer service.

        I've seen this many times, but I have to say, I've found them pretty good so far.

        I've had a much more lpeasant experience with them than the one I got from HSBC :-(

        Vic.

        1. Nigel 11

          Re: @Graham Marsden

          Santander make it very easy to put your money in. They are total bastards when it comes to getting it out again. Santander is a Spanish bank. Is that the sound of a penny dropping? Good luck!

          1. Vic

            Re: @Graham Marsden

            > They are total bastards when it comes to getting it out again

            As I said, I've not experienced that yet. I've been with them for about 3 years.

            Vic.

  14. taxman
    Boffin

    Annual DR Exercise results

    Disaster Recover excercise may be considered a success (technically) - systems successfully discontinued before establishing a managed slow return to the state existing several days before commencement. The Business Continuity Plan need tightening up a little, findings suggest it is perhaps a little too robust; savings from reducing reliance on standby manual may be able to be realised. However, as is the norm for IT Projects, the Communications Plan needs to be revisited. Suggest we re-examine the present resource.

  15. Anonymous Coward
    Anonymous Coward

    Ha ha, fooled you

    You didn't think they would make it easy to actually close an account, did you?

    (5 years of £0, 'must be done in writing', many letters, not a single reply)

    1. Nigel 11

      Uncloseable account

      I have a credit card account which I cannot close (translation: the bank does not know how to close) because some ****up means they owe me 22p. I've on various occasions asked them to donate the 22p to charity, to send me a cheque, to just lose it in their error account .... They always say they've fixed it. Three months later I get another statement telling me that they still owe me 22p. I no longer have a card, so I can't go out and buy something and then get the balance to zero second time around.

      The problem was latent for a number of years after I thought I'd closed the account, and only surfaced when a UK bank bought all the customers of my onetime credit card company which was closing down its UK operations. I guess that once an reverse-indebtedness of 22p was transferred from one database to another, there was/is no programmed mechanism for sorting it out.

      I guess that on the bright side, my 22p means that the bank has contributed getting on for fifty times that amount to the Royal Mail, which needs all the help it can get! (Wonder what happens when I pop my clogs ... will they still be sending statements to "Executor of your truly, deceased" in the year 2200? Or perhaps inflation will finally cure the problem when the pound eventually becomes the smallest unit of UK currency?

      1. durandal

        Re: Uncloseable account

        If they're paying interest, that's your meal at the Restaurant at The End of The Universe sorted!

      2. Anonymous Coward
        Anonymous Coward

        Re: Uncloseable account

        When I worked for Digital I took advantage of the employee share scheme and got a few shares. Later on I put in an order to sell ALL the shares (radio button option ALL, not a number of shares or a dollar amount) when they hit a certain value. Before they hit there was a dividend and I ended up with about an extra half HP share. When the target was met instead of selling all the shares they sold the ones I had when I placed the order and so I've been left with half a share for about ten years. Every year I get the all the company accounts bumpf and a voting slip for shareholder meetings. The latter I just disagree with all the recommendations and send it back. I also get tax statements which inform me that I've got an extra 0.19c dividend and they've witheld 0.07c in tax. It must be costing them many times the value of any benefit they get from managing half a share but what am I to do? They didn't complete the order as put. If I sell again I'll get a cheque for about $10 which will cost me more to cash it. And how can I donate half a share?

  16. Hawknic
    Thumb Up

    good article

    spot on

  17. Tom_

    Transferring accounts

    The only time I did it, they transferred SOME of my direct debits, but I didn't realise one had gone missing until Vodafone cut me off. Vodafone didn't contact me to tell me why, either.

    So I ended up having to move bank again and change mobile networks.

    Another partial success.

  18. Z80

    When I transferred my ISA out of NatWest I decided to also close the current and savings accounts that I'd stopped using a few years ago.

    I popped into my branch, told the chap behind the desk I wanted to close the account as I didn't need it any more and without any fuss he opened up his Intranet account management pages in IE6 and sorted it all out. I just needed to stick my card in the reader and enter my PIN a couple of times.

    1. Anonymous Coward
      Anonymous Coward

      @Z80

      >I just needed to stick my card in the reader and enter my PIN a couple of times.

      Ah, the PIN. I don't use anything that needs a PIN so never bother even remembering them. When i went to close an account at the Halifax they required that I put in my card and enter the PIN: I am there in person with various forms of ID yet they still want the card and PIN. Fortunately the "girl" at the desk was a lady of advanced years, probably filling some sort of quota, and she had the same attitude as me. We agreed that I'd lost the card and though it took bit of faffing about over a friendly chat she eventually managed to close the account.

  19. Imsimil Berati-Lahn
    Pint

    moving banks is a pain in the pisser

    It's a payroll thing.

    Money coming out of the account I can handle myself. Direct debits, standing orders etc, piece of cake, no problems.

    Sadly / fortunately / otherwise, money coming _into_ the account is mostly dealt with by our company's payroll contractor (whomever that might be today). Changing those details is a balls ache process of filling in about five separate forms, including chapter and verse on proving who I am and that the new account is legitimately mine. Sure I understand why they want these levels of surety, and I want them too, don't want my salary accidentally ending up with someone else, but the fact remains, its a total pain.

    For that reason, I change banks only when I change jobs.

    Beer, because I feel I need one now just thinking about it... and for the lack of a very generous single malt icon.

  20. Anonymous Coward
    Anonymous Coward

    Closing accounts

    Isn't it Santander that will let you easily open accounts online, but requires you to personally go into a branch to close them again? And it seems to take them 15minutes to do it, all the while the queue is growing...

    These guys deserve to have loads of accounts with £0.00 balance sitting around. Trouble is it becomes a PITA when it comes to chasing them all up for nil-interest certificates for tax-returns. While Nationwide can get their interest certs done within a month or so of the end of the tax year, Halifax (who I gladly no longer bank with) and Santander (reluctant customer) are normally still dragging their heels in July...

    1. Nigel 11

      Re: Closing accounts

      Have you ever been asked by HMRC for an actual nil-interest certificate on an account with a negligible balance? If they did ask me, I'd say that the account had a negligible balance and that I'd happily surrender all money in the account to HMG if they could only accomplish what I could not -- persuade the bank to close the accursed thing.

      I've never been asked for a certificate at all. I ask for or print, and keep, the ones representing significant sums of interest just in case, but I reckon even HMRC has better things to do with its time than ask for proof that I really did have all the tax I owe deducted from 55p or 5p or 0p of interest.

  21. peterp

    My grandfather, a man who rebuilt jet engines for a living, kept all his cash in shoe boxes in his wardrobe - I used to think he was just really old-fashioned. How were we to know that he was really fantastically far-sighted, being 50 years ahead of his time!

    1. Nigel 11
      Mushroom

      If TS ever really hits TF, paper cash will become worthless. You'd need gold for large sums, silver for smaller ones, and I'd hazard a guess that fifty quid in pound coins would be worth more than fifty quid in tenners because small change would still be needed.

    2. Anonymous Coward
      Anonymous Coward

      Bad idea

      Having seen in yesterday's news that a woman lost thousands (termites made a nest in her safe and ate the money in it) I'm not so convinced that this is a good idea.

  22. Spoonsinger
    Thumb Up

    Speaking of Northern Rock,

    Got a cheque last week from NRAM, because of accounting errors, (which I didn't know about), when I used NR for a mortgage, (over 2 1/2 years ago). They also paid 8% interest on the error. Thanks tax payer :-)

  23. Anonymous Coward
    Anonymous Coward

    Don't they test these major upgrades?

    Oh, hang on a minute. Your average test department isn't all that well resourced in terms of people, training or tools. They're really just a lip service; people to blame when things go wrong and a nice box to tick when the ISO auditors visit.

    AC: Because one's employer would know exactly who one is having a dig at, if they saw one's name.

  24. Nerd
    Coat

    I'm fine with these sort of cock ups - the more they occur, the better chance my mortgage will finally disappear.

    1. Anonymous Coward
      Anonymous Coward

      @Nerd

      Don't you know that banking errors only work in the banks favour. If anything your mortgage would double and you'd spend the next fifty years trying to convinve the bank that they made an error which they won't listen to because they never make errors and all their security measure to ensure so are infallible.

  25. Jim 59

    Incompetence

    "...engineer a similar crisis at another bank this week."

    The banking sector has deployed so much incompetence recently that there is a danger that their incompetence reserves might run low. Fortunately, they can always borrow some incompetence from another bank. Some people think that banks create incompetence out of nothing but this is not really true. Some chief executives are paid huge bonuses for their incompetence, and...

    1. Anonymous Coward
      Anonymous Coward

      Re: Incompetence

      You touch upon an important philosophical point:

      Is there a finite amount of incompetence in the universe? And if so, we've been chewing through a lot of it of late. What happens when it has all been used up? Do things suddenly go right, or does time freeze? What will politicians do for a living if the banks have have used up all the incompetence? Is incompetence a fundamental part of the fabric of the universe? Indeed, is incompetence what scientists have been foolishly searching for under the guise of "dark matter"? Does incompetence have mass, and therefore attraction - certainly it appears to cluster. Is the Higgs boson merely a typo - they haven't found it because it isn't a boson they should be looking for, but in fact a bozo...

      I submit my thesis for the Nobel prize for Physics, with the final piece of the Standard Model: The universe is held together by the mutually attractive force of the sub atomic particle of incompetence, the Hester bozo, which has been proven to have a mass of 37 Giga Quid.

      1. Nigel 11
        Boffin

        Too late

        Google "Quantum Bogodynamics"

        there's also a joke paper from CERN out there about Quantum Indeterminacy applied to banking. One observation is that it's impossible to know the precise ownership and value of anything at the same time. The value is certain at the time an entity is sold, but the ownership is highly indeterminate. On the other hand if it's been in the family for generations the ownership is near-certain, but no-one has much idea what it's worth.

      2. Nigel 11
        Boffin

        Re: Incompetence

        Also Google "Administratium", which doubtless has a Quantum Bogodynamic explanation awaiting discovery

      3. Nigel 11
        Joke

        Re: Incompetence

        And I've just realized that there may be an explanation for the biggest wrong number in physics, that discrepancy of the order of 10^113 (give or take a few) between the observed energy density of the vacuum and the values predicted by all Theories of Everything to date.

        The universe is the most successful Ponzi scheme of all time, but no-one has rumbled it yet.

        Oh dear ... I predict the End of Everything starts about n

  26. Daggersedge

    Interesting article, but there are some points that have gone unaddressed.

    The fact that this won't break RBS is worse than if that were possible. With it's hand firmly in the pockets of taxpayers, RBS has no incentive to clean up its act. It can just treat this as a 'little glitch', shrug its shoulders and move on. If that is what happens, and I think it likely given the lack of government response to the situation, then the current disaster can - and probably will - happen again. Will bank 'outages' become the new norm? It's possible. After all, people have been told they will have to put up with standpipes, higher energy bills, higher petrol costs, and lower wages. More to the point, people *have* put up with these things. They have also put up with all the security theatre at airports, the increasingly potholed roads, appalling train service, political correctness, and MPs writing their own expense rules. Certainly, from time to time, they may make a bit of noise, but nothing has been done. Things continue to grow worse and nothing is done. The same could happen with the banks.

    The problem with the banks might not be solved, but people will come up with a workaround if these 'outages' keep happening, or, at least, if people think them likely to happen. People will start stuffing their mattresses with money. A few will buy gold, but, mostly, people will start to keep their money out of the banks. That will make them feel safe. They won't be safe, but that's beside the point.

    Will the government just stand by while people try to live as much as possible without banks? I don't think so. Most likely it will make the government work harder to institute a cashless society. The government in the UK, after all, thinks cash is evil. If one is using cash, one must be a terrorist or a drug dealer, or, even worse, one must be attempting to evade taxes. Can't have the little people doing that, can we?

    Will people put up with a cashless society? Possibly, if they can find a workaround. If the euro still exists, they might import them from the Continent, for example, and create their own shadow economy. They might form barter networks. Whatever workaround is chosen, it will work until it doesn't. Then that's when chaos starts to *really* happen. Technology can allow you to build right up to the 1 year flood mark, and for a time, everything is fine, but when it really floods, when it gets past the barriers, the damage will be much greater than if normal safety procedures were in place, that is procedures in place before the enabling technology existed.

    So, while in the short term, thinks might not go badly for RBS, or too badly for the UK, all that is it is doing is storing up problems for the future. Après moi, le déluge and all that.

  27. David Simpson 1
    Megaphone

    The only really puzzle for me is where the name Crock came from half way through this article.

    1. Nigel 11

      as in Northern Crock?

      The broken bank.

  28. Anonymous Coward
    Anonymous Coward

    Just another symptom of the bankruptcy of modern 'banking' (private currency creation).

    Modern Banks are effectively state legalised and camouflaged fraud (fractional reserve debt) and embezzling (usury) gangsters; these predators are such an established part of society, and most people have insufficient financial education to comprehend their true nature, that they are accepted by most without question.

    The banks and states are discovering that their respective prey are becoming less due to excessive predation by them, so are being forced to scaling back their greedy consumption far faster than they can cope, so damage like this occurs.

    This bank should never have been bailed out, it should have been put in private receivership and sold off; yes, this may have caused some pain, but it would have been far less painful that the far worse pain to come!

    Re: Bootnote

    True, credit is not money, because real money must have a known value which does not require trust (e.g. precious metals); we currently have effectively interchangeable fiat currency and credit, of nominal paper value, but effectively worthless if trust evaporates.

    Fractional Reserve Debt (yes, created out of thin air, currency) is not a fairy story, but a toxic worldwide Ponzi scam of exponentially compounded debt and usury; it is effectively Secoinage on steroids, and is inherently unstable.

  29. amanfromMars 1 Silver badge

    Until IT puts in a Fix, will IT Continue to Cause MODern DODgy Systems Collapse ....

    ...... with Increasing Attacks and SQL Squirmishes. It is only natural when exercising and discovering new phorms of intelligence are available, and freely flowing to the masses.

    "RBS IT cockup: This sort of thing can destroy a bank, normally" ….. Tim Worstall

    Quite so, Tim, and it would also normally immediately have a devastating effect upon its share/stock price with a feeding frenzy on those dodgy markets. That appears not to have happened in this peculiar and particular RBS case?

    Does that tell one and all that the banking and markets and media systems are rigged and are not a free market economy reflective of successful capitalism/mercantalism but are in fact, just part of a fiction driven by inventing wealth which is just based upon myths, which would all confirm, would it not, exactly that which you don't want to hear about, which would be the truth, which is hardly irrelevant? …….. " No, please, I don't want to hear anything about 100 per cent reserve banking, or the way that banks create money out of thin air. Whether all of this is true or not (it isn't, the banking system as a whole creates credit, not an individual bank's money) is irrelevant. Whether or not we achieve maturity transformation by banks, their purpose, the confidence fairy problem nevertheless continues to exist and RBS faces exactly the problems outlined above."

    Build anything upon anything which seeks to hide, and must hide the truth to survive and prosper, and every system associated with it will fail catastrophically, very quickly, once even the tiniest part of it is perceived/suspected/proven to be a part of the fraudulent whole. Then does one have the unstoppable beginnings of an ugly black hole event which disappears/reveals all, rather than it being part of any sort of elegant black swan event

    Such corrupted systems are turkeys, and it is Xmas and Thanksgiving with every passing zeroday for them, as their IT systems administrations battle to contain the raging contagion within and which which they cannot treat and root out because it is the lifeblood of their compromised immune systems.

    Blessed relief and salvation though is just a simply complex matter of inventing another, but considerably better, Beta Fiction, but that does require considerably more and much better intelligence than crashed and crashing systems administrations/CIOs/CEOs/Power Elites have shown they do not possess. It is easily bought in though at whatever confidential cost would be quoted by anything which would be recognised as exercising competence in such a field of many fields, for there are many cointerindependent internetworking disciplines to coordinate and reprogram in what is really a Global Virtual Rebuild rather than Systems Repair/Reboot/Restore.

  30. kain preacher Silver badge

    Jaded

    May be it's cause I'm jade but I expect this ti happened again.

  31. P. Lee Silver badge
    Holmes

    But what caused the outage?

    Having worked in IT in a non-UK bank, my guess is that all the banks are held together with spit and an elastic band.

    DR kit is always under-resourced or merged with the test environment or some such thing. There are far too many custom data interfaces which don't have any DR and can't be failed over, so the bank never does a full DR test and it never does a full test in the test environment.

    I've seen whole sections of a bank run on ancient flat-file databases where the db vendor and the db app developer went out of business over a decade ago. I've seen plenty of "here's our DR app server - it connects to the "master" db back at the main data-centre."

    The prevailing attitude is "its mission critical, don't touch it" rather than, "its mission critical, make sure you have the documented the business logic and can reproduce it." If DR is substandard, don't implement it until you've got financial sign-off for remediation.

    Part of the problem is that we demand so much from "enterprise" systems in terms of flexibility, that we fail to implement what is important. You need a proper working DR which is regularly and frequently tested. If that's scary, it should be a sign that your DR isn't up to standard. If internal personnel don't have faith in what is going on, why should i? Perhaps working and demonstrable DR should be a requirement of a banking license?

    For the individual, what's the lesson? Get multiple bank accounts, get a credit card, even if you don't think you need it. Trust no one. Check your own single points of failure.

  32. Shannon Jacobs
    Holmes

    Recommendation of Freefall by Stiglitz

    However, I think it can be summed up as "Accountants know the cost of everything and the value of nothing."

  33. mark l 2 Silver badge

    Im with RBS at the moment, have been since well before the government bailouts, but will be moving to another bank (probably COOP) within the next 12 months anyway. Not because of the screws ups at RBS last week but because they are going to sell my account to Santander who i hate with a passion and don't want to give a penny of my money to.

  34. Grubby
    Boffin

    Project Review

    At the end of any project / incident I'm asked to do a summary of what went on and what lessons can be learned so here goes:

    We lent money we didn't have to people who couldn't pay it back and then sold their debt to people who couldn't pay it and used the money they hadn't paid us to lend to people who couldn't pay.

    We realised we had no money and asked the tax man. He was very kind and gave us the money. Lesson learned here, it's ok to mess up if you're big enough.

    We then had to think up a way of cutting costs to pay back the tax man so decided to remove all the expensive things like quality, skill, experience and training and then rubbed salt into the wounds of the tax payer by sending all their jobs out of the UK to people who don't speak English as a first language, can't empathise with a customer and have a circa 6 month tenure at best, making it impossible to train or gain experience.

    Then a system breaks and no-one can get their money, meaning no-one has any money. And we're back where we were 3 years ago.

    1. amanfromMars 1 Silver badge

      Re: Project Review

      Grubby, Hi,

      Did you mean to say, in place of …. "We lent money we didn't have to people who couldn't pay it back and then sold their debt to people who couldn't pay it and used the money they hadn't paid us to lend to people who couldn't pay." .... the rather more accurate reality descriptor of ….. They lent money they didn't have to people who couldn't pay it back and then sold their debt to people who couldn't collect and profit on it, and used the money to enrich themselves rather than lend and/or give it back to the people who couldn't pay and weren't paid in the debt sales.

      And their madness is that they think there will be no ruinous price that they will personally have to pay, now that the system is realising their scams are endemic and foolishly designed to perform in a such a sub-prime fashion, again and again and again because they never ever imagined their system would be rumbled and tumble.

      And now that the codes have been cracked and their practices hacked, and the world is being made aware of the shenanigans, do they have a real major problem which is getting ever bigger every day that it is not solved, with the corrupt leading system replaced wholesale with something else different and better.

      The problem is at the head and the heart of the operation, which is rotten to its cores, and has nothing at all to really do with the body of the system, which with enlightened novel administration would work exceedingly well.

      1. amanfromMars 1 Silver badge

        Hmmm? No balls to tell the truth, the whole truth and nothing but the truth?

        Mervyn King being more circumspect and diplomatic and waffling a great deal on the same set of conclusions and results? ........ King swansong

  35. Anonymous Coward
    Anonymous Coward

    The current banking system is based on massive fraud

    This is a brilliant article and scratches on the tip of the real iceberg.

    When you ask for a loan, the numbers are simply typed into a screen. In order for this scam to work, Banks must be in collusion with Governments.

    Thus every country has a Central Bank in the US it's the Federal Reserve, in England the Bank of England, Germany - Bundesbank. these act as "guarantors". The BIS (Bank of International Settlements ) in Switzerland is the biggest "clearing house "for this.

    For more detailed information, see Thrive the movie - http://www.thrivemovement.com/the_movie

  36. Anonymous Coward
    Anonymous Coward

    While outsourcing isn't really to blame for the problem, it is a shame that so much outsourcing is going on.

    While the bank see it as cost cutting, what happens is the money leaves the country and doesn't help the UK economy.

  37. Anonymous Coward
    Anonymous Coward

    CNBC Admits We’re All Slaves To CENTRAL BANKERS GLOBAL GOVERNMENT

    Sums up what has been happening so far...

    But watch this space as the Banksters get arrested en masse...

    http://americannationalmilitia.com/2012/06/cnbc-admits-were-all-slaves-to-central-bankers-global-government/

  38. Geoff 19

    But this has happened before

    STOP THE WORLD - YOU ARE MISSING THE EVIDENCE OF THE PAST

    One thing that is missed by all is that a similar event happened at Royal Bank of Canada about 7 years ago. RBC is "the" biggest bank in Canada so it was a very serious matter. I worked for them at the time, although not on the retail side.

    The issues and stories about impacts and the overtime working by staff are exactly the same for Natwest as they were for RBC back then.

    Yes it damaged the reputation ofg RBC but that was soon recovered. I suspect that some accounts were moved. Looking at the bank now it is one of the safest and well run in the world. it is certainly seems to be skirting the credit crises very well. RBC is impacted but then all banks are impacted.

    We need to step back, and realise that this will blow over and life will will go on.

    1. Anonymous Coward
      Anonymous Coward

      Re: But this has happened before

      Yes, it does happen with a certain periodicity.

      But were RBC already in trouble for such poor lending and M&A practices that they'd bankrupted themselves and been bailed out by the state? Were they already on the hook for paying huge bonuses but no dividends? Was their corporate arm associated with malpractice? Had they systematically worked to export as many Candian jobs as they could? Were they handing over unwilling customers to a foreign bank itself looking distinctly needy? Were the directors of RBC the fattest, most useless cats in all of corporate Canada?

  39. Anonymous Coward
    Anonymous Coward

    That's the wonder of oursourcing.

    See how much money RBS has saved. It would have cost them three times the amount they wouldn't have had to pay cos it wouldn't have happened here, had it happened here.

  40. Annakan

    I love how you conclude "No, please, I don't want to hear anything about 100 per cent reserve banking, or the way that banks create money out of thin air. Whether all of this is true or not (it isn't, the banking system as a whole creates credit, not an individual bank's money) is irrelevant"

    Because pushing aside what would show that your reasoning is, in current banking reality, partial is not making a good point for your analysis.

    Bank do create "money" (not value) out of 'thin air' (scriptures) and the liquidity ratio is one thing, but the debt to capital ratio is another one and much more important.

    If 100% of your debt is capital somewhere there is a good chance another bank can lend you liquidities to cover a bank run. That bank ru would then dry up probably by itself since the fear would be unfounded : people get their money back, the bank run-ed bank get less profit or some small (interests) debt.

    Now if you are a bank this an abysmal debt/capital ratio : i.e you have created scriptural debt much over what you can truly either access or own from you own resources then the bank run is a completely different beast. Because the confidence your customers had in you WAS unfounded, you were just hoping there will not be a bank run .... and that is exactly the trouble with the banking system.

    I would like to had that since the banking system privatized the money creation power by lobbying for central bank "independence" a major regulating tool for nation and states, the loonies are in charge.

    P.S. : central bank independence does not mean that those "central bank" can set their policies as independent power separate from judicial, legislative and executive (that idea is already troubling to me, as if economy had an existence outside the body politics and society but I digress), no the real meaning of "independent central banks" is that they are now forbidden to use the state treasury as a guarantee, they can't make them print money to lend, in simple term. They are then mostly running on the same "flawed confidence" system as private banks.

    To me the whole piece is interesting as another demonstration of taking one thing for another : talking about what bank **should be about** while being blind about what they are truly about now.

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