Y2K upgrade caused more problems than the millennium bug

Banking giant HBOS has been fined by the financial services watchdog after problems with a back-office systems upgrade meant that 5,500 account holders did not receive money they were owed.

The Financial Services Authority (FSA) fined HBOS £750,000 for failing to introduce adequate safeguards in the administration of Personal Equity Plan (PEP) and Individual Savings Account (ISA) schemes in 1999.

The problems arose when the Bank of Scotland was carrying out upgrades to its bespoke investment management system as part of its year-2000 compliance work.

Ironically, the so-called millennium bug caused very few problems with computer systems.

Errors made during the upgrade to Misys' Quasar system meant that payments to 5,500 ISA and PEP accounts were not made.

A spokesman for HBOS confirmed that the glitch caused by the upgrade in October 1999 meant that accounts had to be updated manually.

"This took longer than we hoped. But we have learned valuable lessons," he said.

All customers were compensated for their loss. The actual amounts they received were relatively small - on average about 50p - but the FSA said that the amount was small because of the value of shares at that time.

In a statement, the FSA said: "In different circumstances the amount could have been much higher."

The watchdog has stressed the importance financial institutions should place on their infrastructure.

Andrew Procter, director for enforcement at the FSA, said in a statement: "In the current climate some firms may be tempted to cut back on investment in back-office systems. This would be extremely short-sighted."

The systems in question have subsequently been replaced, following the Halifax/Bank of Scotland merger.

vnunet

-- Anonymous, February 25, 2003