The Slaughter and May Report has delivered a damning verdict on the role of TSB’s Board, Sabadell, its IT provider Sabis and senior executives over the decision to migrate 5 million customers on to a new IT platform.

Almost every page of the Report seeps with tales of incompetence, indifference and naivety culminating with the current Chairman of TSB, Richard Meddings, declaring: “What do I know about Sabis?…..all looked fine [and] I didn’t think to ask whether, actually, there was a vulnerability in here…”. (page 75, paragraph 9.31 C)

Whilst Paul Pester, the ex-Managing Director of TSB, is trying to blame his Spanish colleague – Carlos Abarca – for withholding testing information, the fact is all the senior executives involved in this migration, including the board of TSB, are collectively responsible for the biggest IT meltdown in banking history. The fiasco will cost TSB almost £500 million, when you include the inevitable fines from the PRA and FCA. What’s worse, is that the financial fallout from this disaster will result in more branch closures and hundreds of redundancies. TSB staff will be paying for the IT disaster with their jobs, unlike some executives and board members. Any ordinary member of staff who had produced such a level of incompetence would have been dismissed immediately. Unfortunately, we live in a twisted world where incompetent executives get millions, and innocent members of staff get nothing.  

All of those executive directors who are still employed by TSB and the entire Board, should go, and go quickly. One assumes that Mr. Abarca, Chief Technology Innovation Officer, will be reading this Newsletter on the plane back to Spain.  

All of the deferred share options to past and present executives should be cancelled immediately and TSB should recover bonus payments already made to Mr. Pester and other executives for ‘work’ on the migration.

This sorry episode is truly a case of lions being led by donkeys.

TSB Undermines Its Own Report

Both Mr. Meddings and Mr. Pester have tried to undermine the findings of the Slaughter and May Report. Mr Meddings says: “There are a number of areas where the report doesn’t paint the full picture of what happened and there are indeed aspects of the report with which the Board doesn’t agree”. Mr Pester said: “It’s a scattergun approach which makes their report a complex and confused read….”.

You know when a Report like this gets to the truth, when the two main culprits seek to undermine its findings.

The report is neither complex nor confused and we would urge members to take the time to read the executive summary, if nothing else. It makes you wonder how these people were ever appointed to TSB?

What the Report also highlights, is the extent to which TSB, Sabis and Sabadell have tried to undermine the work of Slaughter and May, at almost every stage.

Why would TSB refuse to answer follow-up questions on information it had provided, for a Report it had itself commissioned? (page 227, paragraph 23.12 A) And why would Sabadell “decline to contribute to our review”, when that was contrary to the Terms of Reference, which had been agreed by the FCA and PRA. We will be writing to the FCA and PRA on this issue.

Slaughter and May also say that they “faced extensive difficulties in accessing evidence from within Sabis” and “it is still not clear that we received the complete set of the Sabis email data that we requested”. (page 237, paragraph 23.12 A + B) In respect of providing data and access to key senior individuals for interview, TSB “was at times less responsive than we would have hoped” according to the Report. In the Terms of Reference, it says that “Slaughter and May shall have unfettered access to TSB and Sabis’ data…..”. (page 234, paragraph 5.1)

A good example of the TSB trying to undermine the Slaughter and May Report can be found on page 196 (paragraphs 19.15 and 19.16). The Report says “Following the first week after Go Live, TSB continued to experience issues relating to its Digital, telephone, and branch Channels. To assess the extent of these issues, we asked TSB to provide us with clear data on a number of metrics for the period from Go Live through to 10 June 2018. TSB declined to provide this data.”

And another one:

“We asked TSB to provide evidence as to whether and how the other Executives reviewed the NFT (Non-Functional Testing) Final Report, but TSB declined to respond”. (page 160, paragraph 16.30)


“While TSB provided us with a breakdown of the various Defect categories at our request, it refused to provide us with the underlying data used for the TSB Defects Analysis”. (page 168, paragraph 17.17). It now turns out that there were 2,061 defects outstanding at the time the decision was made to migrate, but only 800 of those had been reported to the TSB Board. Some of those defects were classified as Severity 1 or Severity 2 (the highest Severity levels).

And finally:

“When we asked TSB to identify which questions (if any) on the Assurance Matrix assessed underlying service performance by Sabis, TSB declined to respond”. (page 161, paragraph16.34 C).

Given that TSB commissioned the report at a cost of £25 million, why did it refuse to answer all the questions raised by Slaughter and May and why did it fail to provide all the information requested?

Moreover, TSB’s conspiracy of silence and obfuscation gets worse because some executives were seeking to resist from the very first day some of the lines of enquiry raised by Slaughter and May. In a WhatsApp message to Carlos Abarca, Chief Information Officer, Helen Rose, Chief Operating Officer, wrote: “….on Slaughter and May questions on migration strategy. There are two angles of attack. One carve out versus migration which board papers deal with well. The second is why a product by product migration wasn’t chosen which board papers are largely silent on”. This message was sent before any interviews had been conducted by Slaughter and May. One shudders to think what internal meetings were going on in TSB to try and undermine the work of the very people it had brought in to determine what went wrong with the migration. One is left with the impression, that some senior executives in TSB were getting together to make sure their stories stood up.

But why? What is TSB hiding? What is Sabadell still trying to hide? The fact it wasn’t prepared to provide any information whatsoever leads us to conclude that there are documents which, if produced, would be embarrassing to Sabadell and its senior management team. 

The Donkeys

Slaughter and May are withering about the role the TSB Board played in the IT meltdown.

It says: “The TSB Board did not fully understand the scope and complexity of the Platform to be delivered by the Programme”. The Board thought that the Proteo4UK Platform was already proven because it was largely the same system used by other Sabadell Group companies with added adaptions for TSB. It wasn’t. Proteo4UK required extensive developments and new components which were critical to the delivery of service to TSB’s customers. It would be fundamentally different to the system operated by Sabadell in Spain.

Members should sit down whilst reading this next section.

Ralph Coates, the current Chief Financial Officer of TSB no less, said in an interview with Slaughter and May: “I understood the platform to be a close copy of the platform in Spain”. (page 57, paragraph 7.28 D) Mr. Coates sits on the Banking Executive Committee and TSB Board. What questions did he ask to determine whether it was the same platform? None, that we can see.

Richard Meddings, the current Chairman of TSB, told Slaughter and May: “I don’t think the board was aware as it is now, that actually this wasn’t simply the Spanish operating platform adapted for UK additional complexity and products….but I don’t think the board was aware, I certainly wasn’t aware, that it wasn’t the Spanish platform plus get it fit for the UK…. I don’t think we were aware of that”. (page 57, paragraph 7.28 B) So, the current Chairman of TSB, who sat in on all the Board meetings and read all the papers, didn’t understand what TSB were getting. Staff are entitled to ask: “what was he doing when attending the Board meetings discussing the IT migration?” It reminds us of the Reverend Paul ‘Crystal Meth’ Flowers, ex-Chairman of the Co-operative Bank who, when sitting in front of the Treasury Select Committee, failed to provide anything like an accurate valuation of the bank’s assets (he said £3bn; the actual figure was £47bn).

The TSB Chair of the Audit Committee, Polly Williams, told Slaughter and May: “The bit that was complete news to us was that it was a development of a new banking platform…we thought we were getting a proven Spanish retail banking system with some wraparound that made it work from a UK point of view”. She then said: “I don’t know who it was from Spain, made the comment that they [i.e. Sabadell] were actually trying to develop a ground-breaking banking product off the back of the TSB migration…that was not a good day”. (page 57, paragraph 7.28 A). Finally, she said that had she understood the extent of the change required: “I suspect it would have changed the whole nature of the project” (page 59, paragraph 7.34). Ms. Williams was Chairman of the Audit Committee tasked with overseeing the IT migration. What was she doing at the 69 board meetings she attended in 2017 and 2018?

When a TSB Independent Non-Executive Director was asked by Slaughter and May whether he understood that the Middleware (software that acts as a bridge between the databases that store customer data and the programs that enable TSB customers to access their products, services and data) was different from what was used in Spain replied: “Not really, you know, middleware is funny thing. It’s something we talk about a lot as technical people but I don’t think it is a word that any board member would understand”. (page 57, paragraph C) It’s a staggering response from a board member who would have been paid up to £100k over the course of the migration. He didn’t understand, or worse take the time to understand, what was going on.

But it’s not just the Non-executive Directors who had no idea what was going on. Helen Rose, the then Chief Operating Officer who was jointly responsible for the migration, said she thought TSB was “migrating on to a mature Spanish platform, proven at scale, of a full-functioning bank with all the channel systems, all the back office systems, all the accounting systems, as well as the core banking platform”. (page 57, paragraph 7.29, A)

The Board’s lack of understanding about what was going on with the migration is quite staggering.  The Board and executive directors should have asked more detailed, searching questions rather than taking everything on trust. Had the Board appointed their own independent advisers for the duration of the project, things could have turned out differently. The advisers they did have were part-time and semi-detached from what was going on. In fact, you could have walked out into Gresham Street and found 10 individuals at random who would have done a better job than the TSB Board. How they continue to justify collecting their board fees is beyond us?

What’s also clear is that the timetable for the migration was far too ambitious. In fact, Sabadell had decided on the date of the migration of TSB’s customers when it first announced its proposed offer. It was this level of arrogance, based on integrating a few insignificant regional Spanish banks, that led it to believe that migrating TSB customers from the Lloyds Banking Group IT system on to its Proteo platform would be a walk in the park. It turns out that Sabis didn’t have the intellectual capacity to take on the TSB migration.  And it’s so called planning methodology, was based on migrations that were significantly different to that being undertaken in TSB.

Where Is Carlos?

The fact that Mr. Abarca is still working for TSB in any capacity, or even Sabadell for that matter, is a miracle. It’s clear from the Slaughter and May report that it holds him, Helen Rose and Paul Pester (together with the TSB Board) responsible for the migration shambles.

One of the principle criticisms of the migration project is that the testing on the some of the functionality was delayed right up until just before the migration weekend. TSB had planned for a period of 7 months before the migration weekend for the completion of functional testing. That 7-month period was to be used proving the system could work at the service levels expected of TSB. The Report says that: “Delays were mainly due to the volume of defects found and pace at which SABIs could fix them. In addition, Sabis continually missed deadlines for the delivery of functionality”. It goes on to say: “The design, execution and reporting of performance testing…were flawed”. The biggest flaw, and there many, was conducting performance testing in just one data centre, which made it impossible to identify key problems before the migration weekend.

The report confirms that it was Mr. Abarca who agreed, following discussions with Sabis, to run tests on only one site and failed to tell the Board. The Board only found out when the IT system was in meltdown.

Not surprisingly,  Paul Pester, seeking to divert attention away from his own significant failings, has jumped on this admission and said: “If these findings are right, Sabis rolled the dice by running tests on only one of TSB’s new data centres and this decision was kept from me and the rest of the TSB Board”.

The report’s indictment of Mr. Pester’s performance will be the subject of a further Newsletter.

It’s also clear from the Report that Mr. Abarca, who had previously run Sabis for Sabadell, was operating a dual role – both customer to Sabis’ services to TSB but also continuing to direct much of the Sabis’ work – and that was always at risk of ending in disaster.

When ordinary members of staff make mistakes the first thing TSB does is subject them to the disciplinary and performance improvement processes. When a senior executive makes a catastrophic mistake like Mr. Abarca, he gets a new job and a pat on the head. Why are senior executives never held to account for their actions? Mr. Pester left TSB with a massive pay off and all the other BEC members, who were just as responsible for the disaster as Mr. Abarca, have been allowed to leave with their reputations intact. That’s simply unacceptable and we will be making this point to the FCA and PRA.

Lies, Damned Lies & Interest Rates

Members will recall that in September 2017 TSB made the decision to delay the migration weekend (set for 3-5 November) and replan the Programme. At the time Paul Pester, then the Managing Director of TSB, said that the delay was because of the anticipated Bank of England base rate rise on 2 November 2017. In an interview with the FT he said if TSB had migrated “our systems would’ve effectively been offline, so we wouldn’t be able to give mortgage quotes or do faster payments”.

In a Newsletter on the same day the bank announced the delay we said: “If Proteo4UK can’t cope with an increase in interest rates then I’m afraid TSB has got a bigger problem than hitting a migration date. Equally, if an interest rate is the real reason, then delay the migration date by one week and not up to 19 weeks”. In a Newsletter a few days later we said: “Members are not stupid they have heard the rumours like everyone else. The systems developed by Sabadell are not fully functional yet and there is lots of testing still to do. Moreover, some of the coding is apparently not up to scratch, which is causing further delays”.

It seems we were right. The Slaughter and May Report confirms that the migration “was many months behind schedule (primarily due to issues in the Functional Testing and data migration workstreams”. It says that “TSB….was not transparent about the real reasons behind the decision to delay the main migration weekend, namely that the Programme was months behind schedule”. According to BEC minutes, the current Chairman, Mr Meddings, “expressed concern that the base rate justification was being overplayed”. The TSB Audit Committee Chair, Polly Williams went even further, when she said she: “was uncomfortable with the very close association of the migration deferral with the base rate rise which I think was more politically expedient than factually correct”. Nevertheless, despite their reservations, the TSB Board approved the deception and the announcement was made to staff and customers.  

The Next Steps

Mr. Meddings and the TSB Board would like to turn the page on the IT disaster and focus on the future. That’s not going to happen any time soon. The FCA and PRA are carrying out their own investigations and they will publish their own reports. We expect that significant fines will be imposed on TSB and possible enforcement action brought against some board members and executive directors. The Treasury Select Committee will want to discuss the Slaughter and May Report in great detail and discuss its findings with all the key actors, once the general election is over.

On Monday the new Chief Executive, Debbie Crosbie, will unveil her new strategy for TSB. Her ability to be able to alter the dynamics of TSB is going to be severely limited by the financial constraints imposed on her by the IT disaster. There will be no rabbits pulled out of the hat. The messaging will be different, there will be limited investment in IT, new branches will be announced, the future of business banking will be a key priority but, in the background, will lurk the spectre of costs, costs and costs. Over the next few years lots of TSB staff are going to lose their jobs directly because of what happened on at 6pm on Sunday, 22nd April 2018. It’s for that reason the TSB Board should collectively hang their heads in shame.

Members with any questions on this Newsletter should contact the union’s advice team on 01234 716029.

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