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The Co-operative Bank is scrapping plans to implement a new banking platform, resulting in the company writing off £148.4 million in IT costs.

The Co-operative Bank is scrapping plans to implement a new banking platform, resulting in the company writing off £148.4 million in IT costs.

It said that its system transformation plans - which involved implementing a banking system from Infosys called Finacle that would connect all the Co-operative’s financial services businesses to help provide a single customer view - were no longer consistent with the bank’s future strategy.

“The directors have concluded that the IT assets previously under creation to replace the core banking platform will no longer be implemented as they are inconsistent with the bank’s strategy going forward, resulting in a write-down of £148.4 million,” the bank said in its interim results for the 26 weeks ended 6 July 2013.

The migration to Finacle was part of a banking transformation plan that began in 2009, when the Co-operative Group acquired Britannia Building Society. The Co-operative Bank decided not to complete, or implement the majority of, the replacement of the core banking platform with Finacle after reviewing the bank’s capital position earlier this year, when the bank announced a capital action plan to address a £1.5 billion capital shortfall. This capital shortfall also led to the Lloyds branch sale to the Co-op falling through in April. 

The review concluded that the bank will from now on only focus on serving retail and SME customers, and no longer provide insurance, nor banking services to larger corporate and commercial customers. Retail banking is understood to be running on legacy systems, but the SME banking system is running on Finacle, having been implemented before the transformation plan was put on hold.

Niall Booker, banking group chief executive and deputy group chief executive, said: “Work is continuing to finalise the exact details of the shape and structure of the core bank, the systems underpinning it, the product range and target customer base, as well as the changes to the cost base needed to return the business to profitability.”

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But he warned that progress would be slow: “We do not expect to be profitable for some years and legacy issues will continue to have an impact on the bank for some time. However, we have a plan to strengthen our capital base and return the bank to profitability based on our distinctive heritage, the loyalty of our customers and members and continued support of our staff and I firmly believe this is achievable over time.”

Meanwhile, Infosys spokesperson emphasised that there were no technical reasons for stopping the migration: “The bTP [bank transformation plan] was put on hold by the bank while they conducted due diligence to support the plans to acquire ‘Verde’ - part of the Lloyds retail banking business. The programme was subsequently discontinued [when the acquisition fell through].

“This decision to discontinue the bTp project has nothing to do with any performance issues relating to Finacle. In fact, even today, the bank is running successfully on our Finacle internet banking solution.”