By Mark Kleinman, City Editor
The City regulator will next week launch a probe into the resilience of high street banks' IT systems following a series of glitches which have threatened to further undermine the industry's image.
Sky News can reveal that the Financial Conduct Authority (FCA) will set out on Monday its intention to conduct a review of the systems of major lenders, just weeks after the partly state-owned Lloyds Banking Group saw an IT glitch shut down half of its cash machines for several hours.
The FCA will disclose its intention to carry out the work in its annual business plan, which details the key areas of focus for the regulator during the following 12 months.
The robustness of banks' IT systems has become an urgent priority for watchdogs amid concerns that repeated glitches are damaging already fragile consumer trust in the banking sector.
In December, Royal Bank of Scotland (RBS) suffered a systems outage on the busiest online shopping day of the year, the third time in about 18 months that such a problem had prevented customers from using cards, cash machines and online banking services.
Clive Adamson, director of supervision at the FCA, told Sky News that the IT resilience work would be a top priority for the regulator this year:
"To access and manage our money we depend on the banks' IT systems being reliable. But IT outages continue, interrupting key banking services.
"We want to make sure that the banks have resilient IT systems in place that are able to cope with consumer demand, so customers aren't left financially stranded or disadvantaged."
The regulator has the power to impose swingeing financial penalties on banks whose systems are defective, with RBS the subject of an ongoing investigation by the FCA's enforcement division into an IT crisis during the summer of 2012.
The FCA's new work will be carried out in conjunction with the Prudential regulation Authority and the Bank of England, and will examine how banks and building societies manage their exposure to IT risks.
It will also look at the level of engagement by bank boards on the issue as well as whether directors are sufficiently knowledgeable to challenge executives.
Industry sources expect the FCA's work to hasten the collective spending of billions of pounds required to modernise banks' IT systems, which have suffered from years of under-investment.
RBS has already said that it will increase its £2bn annual IT budget by £450m, with other major lenders looking at similar hikes.
The regulator, which expects its work to conclude early next year, signalled in a report last year that the growth of mobile banking by customers has outpaced banks' investment in their IT systems..
The RBS problems in 2012 prompted the FCA's predecessor, the Financial Services Authority, to write to the chairmen of the nine biggest banks and building societies to request information about their critical infrastructure and banking processes.
Industry insiders expect the watchdog to take tough action if insufficient progress is deemed to have been made on the issue since then.
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