High cost of more delay forced TSB to upgrade before it was ready | Nils Pratley

It will be no consolation to those TSB customers suffering under the botched IT “upgrade” that the bank had originally planned to do the work last November when, one assumes, it would have been even more badly prepared.

Its chief executive, Paul Pester, said at the time that the “main reason” for the delay was the approach of a likely rise in interest rates, which indeed materialised. TSB, supposedly, didn’t want to leave itself unable to offer mortgage quotes over a crucial weekend.

The explanation sounded thin at the time – more so now. Those who have watched Royal Bank of Scotland’s labours with IT over the years know these major transfers of data on to a new platform rarely run smoothly. Maybe TSB suspected it needed more time. But, if one takes Pester’s line at face value, it could be that TSB was now in a hurry to press the button. The next rate rise could arrive next month and it would be embarrassing to miss another window for “migration”.

Whatever the thinking, TSB and its Spanish parent, Sabadell, were plainly working under financial incentives to move quickly. Pester put the cost of the original delay at £70m and one can understand his calculations. Under the terms of its separation from Lloyds Banking Group in 2014, TSB effectively pays rent to use its old IT system. The cost of this “transitional service agreement” soared last year from £91.8m to £214m, according to the 2017 accounts. Delay, in effect, was costing £10m-plus a month.

“We would never rush if we didn’t think we were ready,” said TSB. Banking and data regulators will want to test that statement in detail. As it is, Sabadell’s declaration on Monday that it had “successfully completed” the transition and achieved “a new milestone” was complete nonsense.

FCA chief vents his impatience over Brexit talks

One of the easier areas for Brexit negotiators to reach agreement about, you might assume, would be financial services. This is territory where – on day one, at least – the EU probably has more to lose than the UK.

After all, as the governor of the Bank of England has put it many times, the UK is “the banker for Europe”. There are cost benefits for EU companies and governments in having bond-clearing, equity underwriting and currency trading concentrated in London. In a messy divorce, costs of capital would probably increase.

It is alarming, therefore, to hear Andrew Bailey, the chief executive of the Financial Conduct Authority, vent his frustration about how slowly talks are progressing. His speech on Tuesday made a strong technical case for why a regulatory system based on “mutual recognition” is better than the EU’s current “equivalence” regime. But his main message was that the talks need to speed up.

The crucial passage was this: “While it is necessary to have unilateral actions in place for the UK, this is nonetheless a distinctly second best solution to the UK and the EU authorities working together to deal with the risks. Let’s get on with it, please.”

Bailey was being polite. It is safe to assume that, behind that “please”, lies deep frustration among UK regulators, coupled with incredulity that EU authorities seem reluctant to talk about a permanent arrangement before a transitional deal is settled. These talks are clearly not going well.

Broadband upstart CityFibre falls into Goldman’s hands

It’s a shame to see CityFibre depart from the stock market. This interesting upstart, with the potential to become a serious irritant to BT Openreach in full fibre broadband, is being bought by a couple of infrastructure investment funds, including one managed by Goldman Sachs, for £538m.

The takeover price represents a 93% premium to Monday’s share price, so was virtually impossible for CityFibre’s board to resist. Its founder and chief executive, Greg Mesch, though, argues that private ownership brings benefits in its own right in the form of committed capital and 10-year thinking.

Let us hope he is right. CityFibre has signed a 20-year partnership with Vodafone and is aiming to provide a full fibre service to 20% of the UK market by 2025. If those roll-out plans are realised, BT Openreach would face stiffer competition and be obliged to pull its finger out. It is uncomfortable for the nation to have to rely (in part) on Goldman Sachs for faster broadband sooner – but that’s where we are.