Trouble with Australian Banks’ IT System May Last for 15 Years

Bob Styran, IT audit expert
April 21, 2011 /

Australia’s banking industry could suffer chronic failures in IT system for up to 15 years as banks are upgrading their systems to newer platforms, according to an analyst who explained that the complexity of the system is the likely cause of several major outages that struck the National Australia Bank (NAB).

November 2010 marked the start of a massive IT system disruptions in NAB that also affected a number of other banks including Commonwealth, Westpac, ANZ, HSBC, St George, Bank of Queensland and Citibank. These banks rely on NAB for the processing of their payrolls.

Some other major banks such as Macquarie Bank, HSBC, Citibank, Bank of Scotland and UBS, had suffered similar incident of IT system failure.

Subsequently, an estimated millions of employees went home without getting any amount from their bank accounts after the disruption.

Although the case is far from being connected to instances of compromise as what had struck the Bank of America late on March, where customers swarmed the bank over complaints of every transaction being denied by the system due to an unidentified card security breach, the IT system glitch in NAB has nevertheless an equally wide effect on Australia’s banking sector.

Jorn Bettin, analyst from IBRS, attributed the disruptions to the “complexity of the systems that these banks are running.”

He warned that these disruptions may recur for several years as banks continue to upgrade their systems to newer platforms. He said as quoted by an Australian news source that the big four banks may take 10 years to upgrade their systems and another 5 years to stabilize the platforms.

An average IT system adopted in Australian banks today has over 30-40 years of life span, which makes it hard for average customers to understand them, Bettin explained.

These systems have 10 million line of codes that roughly equal 500 books. Even a small change to these systems could send a domino effect to the rest of the banking industry, he added.

NAB officials already announced the completion of an independent audit to their IT system conducted by KPMG, a global auditing and consulting company.

Immediately following the disruptions in payrolls, NAB became busy apologizing to customers, not least its CEO Cameron Clyne. Some officials even used Twitter to calm down the infuriated mob.

KPMG’s completed report was confirmed to an Australian news source by NAB spokeswoman Sharna Rhys-Jones who disclosed no further details such as when the audit was done and how the findings went by.

Meanwhile, the soon-to-be national secretary of Australian Labor Party and current spokesperson of NAB, George Wright, confirmed a “comprehensive investigation” conducted by the bank that started on the heels of the IT system disruptions in November.

The incident took a week for NAB to recover from the coding errors that came out in the wake of the IT system glitch. It resulted in the customers having been unable to see their bank balances while the others complained about missing transactions.

 

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