The TSB chief executive, Paul Pester, has stepped down after an IT meltdown in April that locked thousands of customers out of their accounts and is still causing problems five months on.
Richard Meddings will take over as executive chairman with immediate effect and a search will start for a new chief executive.
The departure of Pester – who will leave with a payout of at least £1.68m – was by “mutual agreement” and would allow the bank to be led “without distraction”, Meddings said.
He denied Pester’s exit was directly associated with the meltdown but said TSB needed to led by someone who is “part of the bank’s story, rather than the centre of it”.
He conceded that systems problems were yet to be fully resolved: “Although there is more to do to achieve full stability for customers, the bank’s IT systems and services are much improved since the IT migration,” Meddings said.
“Paul and the board have therefore agreed that this is the right time to appoint a new chief executive for TSB. Our goal is therefore to allow a full search to commence, without any distractions, enabling TSB to build for the future.”
However, Mark Carney, governor of the Bank of England, said it was “absolutely” right that senior managers take responsibility for operational, financial or conduct failures.
Asked about Pester’s departure during a session of the Treasury select committee, Carney said: “Responsibility has now been taken by the chief executive for a series of quite fundamental failings that have disadvantaged a very large number of customers and affected confidence in the institution. We look forward to a new team being put in place.”
Pester, who was chief executive for seven years, said: “The last few months have been challenging for everyone at TSB. However, I want to thank all my colleagues across TSB for their dedication and commitment during this period and for their focus on putting things right for TSB customers.”
He will receive a payout of at least £1.68m, including £1.2m for his notice period and a £480,000 payment agreed before TSB was taken over by Spain’s Banco de Sabadell in 2015. Meddings said that Pester’s “other variable pay” would be frozen subject to the outcome of various investigations into the IT failure and performance conditions.
Pester had resisted previous pressure to quit after MPs on the Treasury select committee in June accused him of being “extraordinarily complacent” and said the bank’s board should give “serious consideration as to whether his position was sustainable”.
Nicky Morgan, the committee’s chair, said on Tuesday it was right that Pester was stepping down but MPs remained concerned about the ongoing issues.
“Since the IT problems at TSB began, Paul Pester set the tone for TSB’s complacent and misleading public communications. The Treasury committee, therefore, concluded that it lost confidence in Dr Pester’s position as chief executive of TSB.
“In this light, it is right that he is stepping down.
“But the committee remains concerned about the continuing problems at TSB, including unacceptable delays in compensating customers who have been badly let down. It is to be hoped that Dr Pester’s successor is able to restore the confidence of the bank’s long-suffering customers.”
Pester had already received a stinging rebuke from the Financial Conduct Authority over the bank’s failure to be open and transparent with customers when a botched IT upgrade locked up to 1.9 million people out of their accounts.
The City regulator accused him of “portraying an optimistic view” of services after the meltdown, which began on 20 April when accounts were migrated from an IT system inherited from the bank’s previous owner, Lloyds Banking Group, to one operated Sabadell, the current owner of TSB.
Meddings said it was a coincidence that Pester’s departure was announced a day after TSB apologised to customers for fresh disruption to its online and mobile banking services on Monday.
Customers trying to log in reported that they were denied access for using the “wrong” details, even though they knew they were correct. Others who had managed to log in said they had been unable to move money between TSB accounts.
TSB said in July the compensation and repair bill associated with the IT problems had reached £176m, but the final cost is likely to be higher because at that point the bank had resolved only a third of the 135,403 complaints it received.
The bill pushed TSB into a first-half loss of £107.4m, compared with a profit of £108.3m in the same period last year.
