MPs in the Treasury Committee have warned greater levies and regulation in the banking sector may be necessary, unless they can improve their IT infrastructure.
A report by the committee found that IT failures at banks was frequent and “unacceptable”. It said the crashes often left customers cut off and without access to cash or services, particularly given the fall in the number of branches and cash machines.
As such, the ministers said, there is a greater urgency in ensuring online banking works.
During 2018, a major IT outage hit at least one UK bank every day, according to consumer group Which?.
The MPs suggest the three major regulators – Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and the Bank of England – do not have the capacity to deal with the growing number of computer failures.
An increase in the financial levies on banks may be needed to ensure that the regulators are adequately funded and resourced, the report says.
The committee also raised concerns over the increased use of third-party providers of cloud services for computing power and data storage.
“The consequences of a major operational incident at a large cloud service provider, such as Microsoft, Google or Amazon, could be significant,” the report said. “There is, therefore, a considerable case for the regulation of these cloud service providers to ensure high standards of operational resilience.”
Steve Baker MP, the Treasury Committee’s lead member for the inquiry, said: “The number of IT failures that have occurred in the financial services sector, including TSB, Visa and Barclays, and the harm caused to consumers, is unacceptable.
“The committee, therefore, launched this inquiry to look under the bonnet at what’s causing the proliferation of such incidents, and what the regulators can do to prevent and mitigate their impacts.
“The regulators must take action to improve the operational resilience of financial services sector firms. They should increase the financial sector levies if greater resources are required, ensure individuals and firms are held to account for their role in IT failures, and ensure that firms resolve customer complaints and award compensation quickly.
“For too long, financial institutions issue hollow words after their systems have failed, which is of no help to customers left cashless and cut-off. And for too long, we have waited for a comprehensive account of what happened during the TSB IT failure. Our inquiry into service disruption at TSB remains open, and I’ve no doubt that the committee will want to examine Slaughter and May’s report and the progress of the regulators’ investigation.”
UK Finance chief executive Stephen Jones said: "Operational resilience is crucial in a modern financial system and the industry continues to invest billions to ensure systems, human and digital, are robust and secure. When incidents do occur, firms work around the clock to minimise disruption and get services back up and running as quickly as possible.
"Digital innovation is transforming the way money is managed with 24/7 access to payment systems, increasing the range of day to day banking options and providing better back-up for customers if a service is temporarily disrupted.
"The industry conducts sector-wide exercises with regulators to ensure it is prepared to respond effectively to any major disruptions or events as part of its continued commitment to maintaining the resilience of the financial system. UK Finance continues to engage with government over how coordination between regulatory authorities could be improved, seeking to avoid overlapped or rushed mandatory change programmes that impact firms’ ability to protect their customers.”