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Bank CIO fined £116k for disastrous migration is on a career break

Let this be a warning to senior technology professionals covered by the British Senior Manager's Regime (SMR). If you oversee a technology migration that goes horribly wrong, it won't just be painful for your CV, but for your bank account. 

Introduced in 2016, the SMR enables the British Prudential Regulation Authority to levy financial penalties on individuals it deems guilty of misconduct. Today it levied one such penalty, of £116k with a 30% reduction for good behaviour, on Carlos Abarca, the former chief information officer of TSB.

Abarca left TSB in 2020 and is currently on a career break. It's not clear whether the fine was expected. Sky News suggested previously that TSB's decision to shunt Abarca from the CIO role to the role of chief technology innovation officer, a job that wasn't covered by the SMR, was an attempt to shield him from personal liability.

Abarca's fine is a warning to other senior technologists overseeing migrations in the financial services sector. The PRA's final notice on the issue details a catalogue of errors which resulted in 'failures with online, telephone and mobile banking services, branch technology failures, and consequential issues with payment and debit card transactions', plus problems in TSB's branches. Some of the online problems were resolved within days. Some of the branch-related problems went on for months.

As CIO, the PRA says Abarca was responsible for continuity planning and for 'providing leadership and strategic direction to the IT function, ensuring that the IT function was suitably experienced and qualified to carry out its responsibilities, as well as identifying, assessing, managing and reporting risks associated with the running of the IT function in line with TSB’s risk appetite.'

The problems stemmed from TSB's merger with Abarca's former (and subsequent) employer, Banco de Sabadell, which acquired TSB in 2015. Spanish-born Abarca, who was previously CIO of Banco de Sabadell, promptly moved into the equivalent role at TSB. There, working with Sabadell Information Systems ('SABIS' of which he was also previously CEO), he set about migrating TSB's services onto Sabadel's platform, mostly through a single 'main migration event,' which went horribly wrong in April 2018.

Nine months before this event, Abarca was out and about giving bullish interviews on "cutting the rope" and avoiding a simple "technology refresh or upgrade of an existing core banking system," in favour of migrating to a "brand new core banking system.” At that stage, though, the move to the new system had already been delayed from November 5th 2017 to March 2018 as testing and operational risk mitigation measures fell behind. 

In a warning to other CIO's working with contractors, the PRA says Abarca failed to manage the outsourcing relationship adequately. In particular, it says he didn't look at the risks holistically and didn't "ensure that TSB formally re-assessed SABIS’s ability and capacity to deliver the migration on an ongoing basis." Instead, he relied on "forward-looking statements of good intention or expectation rather than statements of fact about the completeness of readiness activities undertaken." 

While Abarca has been hit with a personal fine, other members of TSB's executive team have escaped similar punishment. Former CEO Paul Pester lost his job as a result of the fine, but now has a raft of advisory roles (including at KKR) and is chairman of digital bank Tandem Bank. Risk officer Iain Laing left in February 2020, but is doing fine as chief risk officer at Monzo Bank.

TSB's board commissioned an independent report into the migration failings by law firm Slaughter & May. Published in 2019, this showed the discrepancy between the initial plan, the amended plan and the reality as shown in the diagram below.  It said the new plan was based on unrealistic assumptions, with no provision for contingencies and no explicit regression testing phase. "In reality, the programme ran out of time," said Slaughter & May. "Testing ran significantly behind schedule and the programme become parallelised, despite the intention to avoid this." It said this was not adequately explained to the TSB board, which therefore couldn't evaluate the risks.   

Despite the disaster, Abarca initially left TSB to return to his old job as chief technology officer at Banco Sabadell. He left again in January 2023. It's not clear whether the substantial personal fine will curtail activities during his current sabbatical.

The migration that wasn't

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AUTHORSarah Butcher Global Editor

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