Clyne cites three reasons for November payments breakdown
National Australia Bank CEO Cameron Clyne yesterday provided additional detail about the events which led to the bank's major computing failure in late November, revealing exactly how vulnerable banks are to lingering legacy computing applications.
Speaking at the bank's annual general meeting, Clyne said that there were three triggers for the systems failure. The first issue was a 2001 software amendment that had been required to take account of the abolition of Financial Institutions Duty. This, coupled with a miscoding error, prompted the November account balance debacle that is still continuing for some customers three weeks after the system collapsed.
The final contributing factor was the lack of a scheduled maintenance patch, said Clyne. Patches are supplied by software vendors to fix known systems problems, and the un-named vendor in question has since alerted its other global customers about the issue, according to Clyne.
During his address, Clyne made it clear that linear batch-processing computer systems were still causing problems for banks. He said the need for NAB's NextGen project to replace old batch core systems with modern real-time banking systems had been validated by the November systems failure.
NAB isn't alone in falling victim to old batch-processing systems problems. This week Commonwealth Bank suffered a glitch affecting up to five per cent of its accounts and leading to problems with its online banking and ATM networks.
This problem was triggered when an overnight batch process failed, affecting mainly business but also some retail customers.
The bank has since fixed the problem and said that the legacy batch-process system would be replaced.
Of the four major banks, Commonwealth Bank is acknowledged as being furthest along the core systems revamp journey. ANZ is not replacing its core system locally, instead it is refreshing it, while rolling out a new core platform internationally.
Westpac, meanwhile, has decided to delay its core revamp until 2014, focussing instead on customer-facing technology.
NAB's experience demonstrates that a bank can fall victim to even relatively modern legacy code problems, let alone some of the decades-old batch systems issues that persist in the financial sector.
Clyne said that the NextGen core systems project, which will replace 110 legacy systems with fresh code, was now scheduled to be largely complete by the end of 2012.
The bank is however still counting the cost of the recent computer failure. A notice on the bank's website continues to state that while most account balances are now up to date, some customers are still "experiencing inconsistencies" that NAB is working to address.
The bank has set itself a deadline of the end of January 2011 to refund incorrect fees and interest charged.