RBS is to invest £300 million in developing separate IT infrastructure as part of the forced sale of 314 branches to Williams & Glyn’s.
RBS announced on Friday that it would be receiving £600 million from the branch sale, after accepting a bid from a consortium backed by the Church of England to create a standalone bank, which will see a return to the market of the Williams & Glynn’s brand after 30-years.
However, the costs of creating an entirely new IT infrastructure to enable the separation of branches, which serve around 1.7 million customers, is high.
IBM and Infosys are frontrunners to win the contract to deliver the systems, in a deal expected to be worth around £300 million. Previous plans to sell the branch to Santander fell through, in part due to problems with integrating the legacy RBS system with the rival bank’s own technology.
The new Williams & Glyn’s entity will require entirely independent systems, including a core banking platform. A long-term shared services agreement with RBS is thought to be unlikely. It is expected that the IT system will be operational within the next two to three years.
The sale of branches known as ‘Project Rainbow’ was part of an agreement with the European Commission to increase the bank’s capital following a £45.5 billion bailout.
Santander last year backed out of a proposed deal, worth £1.65 billion, after it found that integrating the complex IT systems would be too costly. Consultants Accenture predicted that the migration, which was set to begin in 2010, would take until 2016 to complete. It is thought that the delivery of a standalone IT platform will significantly reduce the time taken to separate the branches.
Under the terms of the EU bailout, RBS had until the end of this year to agree the sale of the branches, but will now ask for an extension for the separation of the 'challenger' bank.