The Co-op bank’s interim financial report revealed that the bank "does not have a proven end-to-end capability to recover from a significant and prolonged data centre outage."
The report said the Bank has ‘received written confirmation from the FCA (Financial Conduct Authority) that the technology issue detailed above constitutes a breach of the FCA’s Threshold Conditions.’
In the CEO’s statement in its Interim Financial report, Niall Booker, CEO of Co-op Bank said: "The Bank does not currently meet certain regulatory requirements and expectations. These deficiencies have existed for some time, and will continue for some years to come, and the Bank’s plan is designed to remediate these over time….We have continued to progress the migration of our IT infrastructure to IBM under the Enterprise Services outsourcing arrangement and this, along with other aspects of our IT remediation programme, has continued to improve our IT resilience in the first half of 2015."
This week’s report said: "As indicated previously, 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 technical component failure is in place, the Bank does not have a proven end-to-end capability
to recover from a significant and prolonged data centre outage.
"The migration of IT infrastructure to an IBM platform (announced on 23 January 2015) is expected to deliver proven end-to-end disaster recovery capability by the end of 2016."
Back in January the Co-op signed a £93m contract to migrate its IT infrastructure from within the Co-op Group to IBM managed data centres. This deal was signed alongside a 10 year £275m managed services agreement.
The Bank’s admission on the fragility of its IT to the point that it is unsure if it could recover in the event of a computing disaster was first raised back in March in its annual report.
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The annual report said that lack of investment in IT had created "unsuitable and inherently fragile" infrastructure.
"The bank’s IT system has been underinvested for a considerable period of time. The bank needs to urgently and significantly improve and re-engineer its existing IT platform as the existing infrastructure is unsuitable and inherently fragile. There are also concerns about its resilience as the Bank’s IT disaster recovery plan is not proven end to end."
This week CEO Booker revealed the bank is unlikely to turn a profit until 2017 and will book losses of more than £200m for the first half of this year, up from £77m for the equivalent period in 2014.
"As we have said before, the financial performance of the business will remain dominated by legacy issues for some time," he said.
"However, this should not diminish the progress made against our strategic plan."
Booker said: "The transformation of the Bank remains challenging and work in progress. We remain focused on achieving capital, IT and operational resilience. We have made good progress and become more resilient every day but this will remain a continued focus for the management team for some time. We have also made progress separating the infrastructure of the Bank from The Co-operative Group and we have begun the work to migrate our IT infrastructure to IBM, which will strengthen our technology platform."
