23 Jun Bank chaos blamed on ‘computer glitch’
Britain’s banks are receiving new rescue packages whilst Westminster’s austerity programme fails to contain rocketing UK debt
Scottish news: Bank chaos blamed on ‘computer glitch’
by Laura Latre and Alex Porter
RBS, Natwest and Ulster Bank customers have all faced financial chaos unable to make withdrawals and transfers from their accounts owing to what the banks say is a ‘computer glitch’.
Bank customers have faced their payments being frozen, benefit payments not being transferred and access to their balance details blocked. The three banks owned by RBS Group reported a system collapse affecting over 100, 000 customers.
RBS group apologised saying customers would not be left out of pocket as a result of the problems whilst promising to keep branches open over the weekend.
The “computer glitch” meant some balances were not properly updated with overnight payments, leaving individuals and businesses potentially missing out on salaries and income. Many balances were not being updated leaving some unable to pay for vital transactions for goods and services.
Thursday, when the ‘glitch’ happened is also the day benefits are paid into accounts leaving many thousands of citizens in poverty without critical payments. According to the independent Financial Ombudsman Service, the banks must refund any charges incurred as a result of the error.
Computer error or financial problems?
This month a series of events have combined to put a number of Britain’s banks’ balance sheets under extreme pressure making this ‘glitch’ seem like an extraordinary coincidence.
Firstly, earlier in the month, Mervyn King was outvoted by the Bank of England’s Monetary Policy Committee as he proposed issuing an unscheduled £50 billion of new quantitative easing to banks. Such extreme measures raise fears that Britain’s banks were suffering potential insolvency risk.
Last week George Osborne and Mervyn King announced a package allowing the Bank of England to provide £140 billion to banks raising investor fears that the reserve requirements were not being met by a number of Britain’s financial institutions.
Then this week Moody’s downgraded some of Britain’s banks including RBS meaning that investors fear loans to Britain’s banks are increasingly risky. The ratings downgrade means the banks must offer more ‘collateral’ in order to borrow funds from other banks.
Together these events would have put RBS under extreme pressure and many investors will view RBS Group’s ‘computer glitch’ suspiciously.
Adding to these fears, it doesn’t help the fact that Royal Bank of Scotland announced cuts of 600 jobs some days ago.
Worryingly, one spokesman for NatWest said they still did not have any information on what was causing the ‘glitch’. One suggestion was that a recent change in its payments’ systems had triggered it.
Have the bailouts failed?
Since the financial crisis started in 2008 some commentators have argued that the bank bailouts would not work and that taxpayers would be squeezed to the point where a financial crisis in the banking sector would become an economic meltdown and sovereign debt crisis.
With the banks being bailed out in Ireland, UK, Greece, USA and so on it is clear that the bailouts did not solve the problem and States, such as the UK which has the worst financial sector debt in the world – standing between 450 to 600 percent of GDP – are experiencing mounting inflation, a wipe-out in savings and economic contraction as the financial sector continues to speculate on markets rather than lending to productive businesses.
At the same time the Bank of England has undertaken £325 billion of quantitative easing and banks have been allowed to leverage higher and higher meaning the money supply has been expanded thus debasing the currency to pay off debts but leading to imports becoming more expensive and so driving up inflation. This results in people’s purchasing power dramatically falling and so represents a type of ‘stealth tax’ by the back door.
Observers will look to the Argentinian crisis where it became increasingly difficult for bank customers to withdraw funds. Bank ‘holidays’ became regular events in their collapsing State as banks failed to convince investors that they were solvent.
Bank runs have become a feature across Europe now with billions of euros being pulled out of banks in Spain, Greece and Italy by customers. This week the Italian Prime Minister and former Goldman Sachs advisor, Mario Monti, issued a warning that there was only “one week to save the Euro”.
This week Scotland’s Fraser of Allander Institute also provoked fears by claiming that if Greece exits the euro and the European economy contracts as the exit starts a “contagion” Scotland could lose over 120, 000 jobs.
Increasingly observers are noting that shock tactics are being deployed to soften the population up for another round of bank bailouts and that 2008 was merely a mild indicator of the storm to come.
Latest: RBS Group has issued the following press release
23rd June 2012
The problems of the past few days have caused disruption and inconvenience for our customers as well as for many customers of other banks.
I am very sorry for the difficulties people are experiencing. Our customers rely on us day in and day out to get things right, and on this occasion we have let them down. This should not have happened.
Right now my top priority, and the priority of the entire RBS Group, is to fix these problems and put things right for our customers.
This is taking time, but I want to reassure people that we are working around the clock to resolve these problems as quickly as we are able.
I also want to be clear that where our customers are facing hardship or difficulty we can and will help them. Our staff have already helped thousands of customers to access cash and we will continue to provide this service on a 24 hour basis while we work to resolve the problems.
I also want to reassure customers that no one will be left permanently out of pocket as a result of this, and again, they should contact us directly about this.
We have double the usual number of staff in our call centres, and for the first time ever we will open 1,200 branches across the country on a Sunday from 9am to 12pm.
Once again I am very sorry for the inconvenience.
Stephen Hester, RBS Group Chief Executive
Support Our INDEPENDENCE REFERENDUM APPEAL