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BoE payment outage showed crisis management failures, report concludes
[LONDON] A major outage last year in the Bank of England's interbank payments system showed the central bank was not fully equipped to handle crises affecting Britain's banks, a report published by the BoE showed on Wednesday.
The BoE suspended nearly 300 billion pounds (S$611 billion) of payments for several hours on Oct 20 after problems with its Real Time Gross Settlement system.
The system underpins financial market trades in the City of London, the world's main centre for foreign exchange dealing, as well as the transfer of funds for house purchases.
The outage was embarrassing for the BoE which has warned British banks to guard against technical failures that could lead to financial instability.
The central bank said it would strengthen its crisis management procedures in response to the report, which was drawn up by accountants Deloitte.
The report said the BoE should acknowledge that "in certain circumstances the Bank itself may be the cause of a wider financial services 'crisis'." While all cash transfers were eventually completed on the same working day, almost a third of house purchases did not take place until the following day or later, according to the report.
"In the absence of ... robust crisis management arrangements within the Bank, there were insufficient resources in place to co-ordinate and communicate response activities," it said.
The report said BoE Chief Operating Officer Charlotte Hogg, Deputy Governor Minouche Shafik and executive director for markets Chris Salmon all failed to see an initial email alerting them to the problem, as they were on business trips abroad.
More than an hour passed before a BoE official alerted Deputy Governor Jon Cunliffe to the issue.
Staff did not start a back-up system because it was relatively untested, preferring to focus on solving the existing problem, which took longer than first thought.
"Early invocation of (the back-up system) on the day could have helped mitigate the immediate impact on the 'real economy'," the report said.
The BoE said it had since placed Shafik in charge of a committee supervising the payments system.
Andrew Tyrie, a Conservative legislator who chairs a parliament committee supervising the BoE, described the bank's response as "steps in the right direction" but said his committee might want to look more closely at the failure after the May 7 election.