Co-op Bank's creaky IT should be flogged off, growls UK.gov
Not confident plans to address tech woes are enough – sources
The Co-operative Bank's creaking IT is so shaky it should be sold off, according to senior government officials.
Sources told The Times that the concerns centre on the bank’s disaster recovery plan. They suggested a bigger player should buy the bank and stabilise its IT system.
The concerns reflect issues outlined in the bank's March annual report, which warned that the bank's infrastructure is in need of an upgrade in numerous respects.
"Across the Bank’s IT infrastructure there are varying levels of resilience and recoverability and whilst a basic level of resilience to a significant data centre outage is in place, the bank does not currently have a proven end-to-end disaster recovery capability," it said.
Co-op is currently in the process of migrating its IT infrastructure to an IBM platform, a project expected to be complete by the end of 2016. However, the report noted the project carries significant execution risk.
Regulators the Financial Conduct Authority and the Prudential Regulation Authority are closely supervising the firm as it works towards restoring its technology compliance. The FCA has informed Co-op that its technology issues constitute a breach of its Threshold Conditions, which include an outline of the minimum standards for technology.
The FCA has the power to take action in the future in relation to this breach.
In 2013, a group of hedge funds took control of the bank from the wider Co-operative Group in a £1.5 billion restructuring. Following the buy-out, in November the bank confirmed plans to spend £500m on overhauling its creaking IT infrastructure after years of "under-investment".
The "primary focus" is "remediation of existing system issues" to meet commitments to regulators and create an IT rig that improves the web-based and mobile banking services, it said.
Pete Coleman, the bank's former CIO who was responsible for putting together Co-Op's IT strategy, stepped down from the bank in April.
A spokesman for Co-op Bank said its IT resilience was improving on a daily basis. ®