Royal Bank of Scotland's $1.7bn sale of 318 branches to Santander has gone titsup.

The Spanish bank pulled out, largely "because of problems over integrating the two banks' IT systems", The BBC reports.

The Telegraph has a teeny bit more detail, reporting a "series of IT problems that have resulted from a lack of compatibility between RBS accounts and the Santander IT systems".

RBS is majority-owned by UK taxpayers. The British bank was ordered to sell the branches by the European Commission, in the wake of its £45bn rescue. The bank must sell the branches by the end of 2013.

This may be easier said than done. RBS had worked for two years on the Santander branch deal.

"Disappointing"

In statement, RBS Group chief executive Stephen Hester said: "While this is a profitable part of our business that we would rather not part with, RBS has worked hard to ensure it is substantially separate from our UK branch network and corporate business and largely ready to be taken on by a new owner.

"Much of the heavy lifting associated with a transfer has already been completed, including separating data for 1.8 million customers and putting in place a stand-alone management team. It is of course disappointing that Santander decided to pull out of this transaction, especially for the customers and staff involved. However, RBS's strong progress in our restructuring plans means we can continue to provide a stable home for this business and its customers pending a further resolution.

"RBS will commence a new process of disposal and will provide a further update on this in due course."

In June 2012, The RBS group hit the headlines when a rookie IT mistake crippled its banking network. Sixteen million customers – individuals and companies - of RBS, NatWest and Ulster Bank were locked out of accounts, unable to withdraw cash or pay into accounts for days.

The cause? An “inexperienced operative” pressing the wrong button on a routine CA-7 batch processing job. ®

Bootnote

Seems like an appropriate time to refer you our interview with David Chan, director of City Uiversity's Centre for Information Leadership: RBS must realise it's just an IT biz with a banking licence.

Also, check out two great columns from Dominic Connor, a City IT head hunter, on the RBS IT meltdown.

So, that vast IT disaster you may have caused? Come in, sit down

Here's a handy guide to riding out the storm:

Do you work in IT at RBS? Or at the next place to get hit ...?