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Don Quijones



Articles by Don Quijones

“Big Four” Audit Oligopoly Strikes Back at Plans to Break it Up

2 days ago

Auditors are still not auditing banks properly despite the crippling costs of the last banking crisis.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Deloitte, one of the so-called “Big Four” accountancy firms that have effectively cornered the global audit industry, has warned the UK government and regulators that any attempt to break up their oligopoly could backfire. Forcing the Big Four — which also include KPMG, PwC and EY — to split could harm Britain’s standing as a global financial center just at a time when the City is straining under Brexit pressures, the accountancy firm told a parliamentary inquiry.
“The Committees, and other commentators, have suggested that the break up of the largest professional services firms should be examined as a means of increasing

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As Erdogan Cements His Hold Over Turkey’s Economy, Global Investors Begin to Panic

5 days ago

His Toxic Mix: destruction of the lira and a mountain of foreign-currency debt.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Two big European banks, Italy’s Unicredit and Spain’s BBVA, will be following current events in Turkey extremely closely. The two lenders have the biggest exposure to the country, which is one of the world’s fastest growing emerging economies. But investing there is an increasingly risk business.
Turkey continues to grow at high speed, expanding by 7.4% last year. But that growth has been fueled by reckless public and private-sector borrowing, much of it at the insistence of Turkey’s strong-arm leader, Recep Tayyip Erdogan. Turkey’s overall stock of private sector debt has grown from 33% of GDP in 2007 to 70% today. Due to the long-collapsing

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What IBM Said about the IT Chaos at UK Bank TSB and Owner Sabadell, Now in its 12th Week

6 days ago

Contracted to fix the fiasco, IBM estimates costs at $1.25 billion: sources. There’s even talk of divorce, after just 3 years of corporate marriage.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
As the blame game intensifies over beleaguered UK lender TSB’s never-ending IT nightmare upgrade, now in its 12th week, relations between the bank’s management and that of its parent company, Spain’s Banco Sabadell, are beginning to sour. According to sources quoted by the FT, things are so bad that TSB executives are even considering whether it has a future as part of the Spanish group after a bungled IT upgrade resulted in operational chaos:
At the heart of the row is the dominant role that Sabadell’s in-house IT provider Sabis played in the botched IT upgrade which left

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Banks Squeal as Spain’s New Government Threatens to Do Unthinkable: Raise Taxes on Their Profits

9 days ago

Payback time for the financial sector that was bailed out by taxpayers, the new government thinks. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
It’s payback time for Spain’s financial sector. At least that’s what the country’s new center-left coalition government appears to believe. After receiving the biggest financial bailout in the country’s history — over €60 billion in direct state aid, and as much as €371 if you include all the recapitalisations, the mass buyouts of impaired assets, the deferred tax credits and government guarantees — it’s time for the banks, which have been racking up profits of late to return the favor.
But the banks are not in a generous mood. The deputy governor of the Bank of Spain, Javier Alonso, warned that hiking taxes on bank profits

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Already Troubled Pemex & Mexico’s Oil Industry Wake Up in a New World

11 days ago

Tectonic shifts and clouds of uncertainty after Sunday’s election.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Since the election on July 1 of veteran leftist politician Andres Manuel Lopez Obrador (AMLO for short), a dark cloud of uncertainty has gathered over the future of Mexico’s oil industry, which was already in dire enough straits. After decades of chronic mismanagement, unfettered corruption, and declining oil reserves, Mexico’s state-owned oil empire, Petroleos de Mexico (Pemex), once the world’s third largest oil producer, excels in only two areas: accumulating massive losses — both in money and stolen oil — and clocking up new record levels of debt.
Now, there are fears among investors, both domestic and foreign, that AMLO could reverse his predecessor

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Despite Wave of Cyber Attacks, Banks in Mexico Double Down on Biometric Tracking of Customers

16 days ago

For hackers, biometric data is the Holy Grail. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In a move fraught with risk, Mexico, a country that has become a haven for the black market of stolen personal data of all kinds, is about to build a big biometric database to be used not just for the benefit of government institutions but also for the nation’s banks.
Last year a law was passed that gave Mexican banks until the end of August 2018 to collect biometric data (finger prints and iris scans) on all their customers. Foreign-owned subsidiaries of global banks like Citi and BBVA were thrilled with the initiative arguing that it would help them combat identity theft. It could also help lenders fulfill their “know your client” (KYC) anti-money laundering checks, at much

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Corporate Brexodus Begins as “No-Deal” Brexit Looms

18 days ago

Potential for ugly consequences, intended or otherwise, is rising.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Construction and infrastructure giant Ferrovial has announced it is moving its international HQ from the UK to low-tax haven Amsterdam because of Brexit. The Spanish firm, which owns a quarter of the UK’s busiest airport, Heathrow, and runs its US, Canadian, Polish and UK operations from Oxford, says it needs to keep within EU legislation after the UK leaves the EU.
Airbus issued a stark warning at the end of last week that it may also consider abandoning the UK over Brexit, its strongest alert yet over the potential impact of Britain’s departure from the EU. A withdrawal without a deal would force it to reconsider its long-term position, potentially

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As Turkish Lira Collapses, Foreign Banks in Turkey Rue the Day

20 days ago

The biggest loser: BBVA, Spain’s second biggest bank.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Few foreign banks are as exposed to the risks currently affecting Turkey than Spain’s second biggest lender, BBVA. The bank owns about half of Turkey’s third biggest lender, which provides roughly 15% of its global revenues. But those revenues are under threat as the value of the currency they’re denominated in, the Turkish Lira, continues to fall.
In 2016, when Turkey’s president Recep Tayyip Erdogan declared a state of emergency after a failed coup d’état, Deutsche Bank analysts alerted that BBVA is the most vulnerable among all European banks to risks linked to political turmoil in Turkey. But rather than heeding the warning, BBVA doubled down on its bet by

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Despite Trump’s Tariff Threat, Automakers Double Down on Mexican Production

23 days ago

Addicted to cheap labor, Corporate America is not playing along.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
President Trump’s threat of imposing 20% tariffs, or earlier 25% tariffs, on foreign produced cars has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s cheap labor. Mexican car manufacturers produced a record 1.6 million vehicles in the first five months of 2018, up by 10,000 from the same period of 2017.
Recent data from the Mexican Association of the Automotive Industry (AMIA) show that in May Mexico’s automotive plants produced 3.9% more light vehicles than in the same month last year. Domestic sales were down 8.9% from January to May, but Mexican assemblers continue to work at full capacity

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Multi-Decade Outsourcing Boom Comes to Sticky End in the UK

25 days ago

After scandals, collapses, and the government’s off-balance-sheet debt.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The United Kingdom, widely considered to be the birthplace of the modern incarnation of the public-private partnership (PPP), in which private firms are contracted to complete and manage public projects, could be one of the first countries to jettison the model.
The collapse in January of 200-year old UK infrastructure group Carillion, whose outsized role in delivering public services earned it the moniker “the company that runs Britain,” has fueled concerns that other big outsourcing groups could soon follow in its doomed footsteps.
Last week the CEO of Interserve, another large outsourcing group, revealed that the government has given the firm a red

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How the ECB Helped Spain “Recover” Faster than Italy from the Crisis

26 days ago

A nation of savers v. a nation of debtors.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In April 2017, the IMF predicted that by the end of the year the Spanish economy would overtake Italy’s in per-capita GDP. It didn’t happen, but Spain does continue to close the gap on Italy.
In 2017, Spain maintained its per-capita GDP at 92% of the EU average while Italy’s slipped another point to 96%. During the darkest depths of the Great Recession, back in 2011 and 2012, Spain’s per capita GDP sank 11 points below that of Italy’s. But now the gap has narrowed to just four points, the smallest since 2007, when, on the back of one of the world’s most mind-watering property bubbles, Spain’s economy very briefly overtook Italy’s.
In recent years, Spain has undertaken painful

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Big Four Audit “Oligarchy” Comes under Scrutiny in the UK after Corporate Surprise Collapses

27 days ago

The “oligarchy” controls the standard-setters, ensuring rules of the game suit it. The long reach of the bean counters also extends deep into the heart of government.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
KPMG, one of the world’s “Big Four” accounting firms, has shown an “unacceptable deterioration” in auditing British firms and will be subject to closer supervision, the UK’s top accounting watchdog warned on Monday. “Fifty percent of KPMG’s FTSE 350 audits required more than just limited improvements, compared to 35% in the previous year,” the Financial Reporting Council (FRC) said.
In other words, KPMG’s UK auditing division got about half its work in the last year badly wrong and is about to have its auditing work more closely audited. The increased

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Consumers Stubbornly Cling to Cash, after Multiple IT Fiascos & Payment Systems Outages

June 16, 2018

An industry dogged by non-believers who fret about privacy and fraud. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The last month has been an unhappy time for daydreamers of a cashless nirvana. Following weeks of disruptive tech failures, payment outages, and escalating cyber fraud scams, much of it taking place in Britain, consumers have been reminded of one of the great benefits of physical cash: it is accepted just about everywhere and does not suddenly fail on you.
The findings of a new study by UK-based online payments company Paysafe, partly owned by US private equity giant Blackstone, confirm that consumers on both sides of the Atlantic continue to cling to physical lucre.
For its Lost in Transaction report, Paysafe surveyed over 5,000 consumers in the UK,

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Blackstone Becomes Biggest Hotel & Property Owner in Spain

June 15, 2018

The PE firm as global landlord.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Private equity firm Blackstone, the undisputed king of property funds, continues to bet big on global real estate. In the last week it raised $9.4 billion for Asian real estate. It was also given the green light to acquire Spain’s biggest real estate investment fund (REIT), Hispania, for €1.9 billion. The move, after its prior acquisitions, will cement its position as Spain’s biggest hotel owner and fully private landlord.
Hispania’s 46 hotels, added to Blackstone’s other hotels, will turn the PE firm into Spain’s largest hotelier with almost 17,000 rooms, far ahead of Meliá (almost 11,000), H10 (more than 10,000) and Hoteles Globales (just over 9,000).
It took Blackstone just three moves to

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Globalized Digital Bank Robbers Feast on Latin America

June 12, 2018

A virtual paradise for real bank heists.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The year 2018 is turning out to be a bumper year for the world’s burgeoning ranks of bank hackers. Last week alone, Chile’s second biggest bank, Banco de Chile, reported losing around €10 million in a bank heist targeting the bank’s local SWIFT network. And embattled UK lender TSB admitted that 1,300 customers have been victims of fraud attacks since its botched attempt to upgrade its IT system. That number is likely to continue to rise as the bank struggles to get its act together.
These incidents follow on the heels of a flurry of highly sophisticated bank hacks in Mexico. The first attack took place in early January when hackers tried to steal $110 million from Bancomext, a

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Humans Need Not Apply: AI to Take Over Customer Service Jobs

June 10, 2018

“With Amelia, we graduate into automating the knowledge worker, the customer service agent.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The last ten years have been a rough time for many bank employees in Spain. The country’s lenders have laid off 89,500 workers on the back of narrowing margins, industry consolidation, mass closures of branches and gathering digitization. In 2008, when the financial crisis struck, Spain was home to some 278,000 banking professionals; today there are just 195,000. Another 3,000 redundancies are expected in the coming months, as Santander and Bankia plan to further streamline their businesses, pushing the total number of layoffs close to 95,000.
The job losses are unlikely to end there. In fact, they could accelerate, especially if a

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Trade-War Drums: Is Mexico Ready to Fire at the US Corn Belt?

June 9, 2018

Various groups are clamoring for it in the third largest market for US food exports.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Mexico, the birthplace of maize, is dangerously hooked on U.S. imports of largely transgenic strains of the crop. In 2017 it was the third biggest importer of corn in the world, behind the EU and Japan, purchasing 15.2 million tonnes of the foodstuff, most of it from U.S. farmers and agribusinesses. But that could soon change.
Following the U.S. government’s decision to impose steep duties of imports on steel and aluminum from Mexico, Canada and the EU, Mexico, a net importer of US steel, has hit back with tariffs on US products including whisky, cheese, steel, bourbon, and pork. The move has upset U.S. businesses, including pork

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Tragicomic Farce at UK Bank TSB Enters Week 7 of IT Chaos

June 6, 2018

Bank-friendly regulators finally show some interest.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Embattled UK lender TSB can’t get even the simplest of things right these days, including apologizing to the thousands of customers affected by the bank’s botched IT upgrade in late April, which has still not been remedied [timeline of nightmare: April 24: “Day 5”, April 30: “Contagion Fears,” May 6: “Internal Revolt,” May 22: “Customers Leave in Droves”].
And the problems are getting nastier: TSB CEO Paul Pester admitted today, when pushed by the treasury committee, that 1,300 customers have become victims of fraud attacks last month, 70 times the normal number. So it would seem apologies are in order. But not even that worked.
TSB recently sent out letters to customers

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Visa Goes Down in the UK, Chaos Ensues, Cash is Suddenly King

June 2, 2018

War on Cash Suffers Setback.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
For over 12 hours on Friday, shopping centers in the UK and other parts of Europe were plunged into chaos as millions of consumers were unable to use their Visa debit or credit cards at points of sale. The credit card company, which was finally able to restore normal service early Saturday morning, said it had no reason to believe the hardware failure was due to “any unauthorized access or malicious event”.
While the mayhem caused by the outage may have been short lived, it served as a stark reminder of the risks, both for consumers and retailers, of depending purely on cashless payments. In the UK, the chaos unleashed was particularly acute since it is one of the world’s most cashless

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“Bank of Mum & Dad,” Huge Prop under UK Housing Bubble, is Running Out of Liquidity

June 1, 2018

“Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends. It’s like a giant Ponzi scheme but where the victims are your children.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
As the economic growth in the UK stutters — for the first quarter, the UK posted the worst GDP figures in five years on weak business investment and household spending — the country’s all-important housing market is beginning to show signs of strain. In April house sales were down 9.4% on the previous year. In the UK’s most valuable market, London, house prices had their worst month since 2009, slipping 0.7%, according to the latest figures from the Office for National Statistics (ONS).
As credit demand slips, some banks have

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Which Banks Are Most Exposed to Italy’s Sovereign Debt? (Other than the Horribly Exposed Italian Banks)

May 27, 2018

“Doom loop” begins to exact its pound of flesh.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Risk. Exposure. Contagion. These are three words we’re likely to hear more and more in relation to Europe, as the Eurozone’s debt crisis returns.
On Friday, Italy’s 10-year risk premium — the spread between Italian ten-year bond yields and their German counterparts — surged almost 20 basis points to 212 basis points. This was the highest level since May 2017, when a number of Italy’s banks, including third biggest bank Monte dei Pacshi di Siena (MPS), were on the brink of collapse and were either “resolved” or bailed out. Now, they’re all beginning to wobble again.
Shares of bailed-out and now majority-state-owned MPS, whose management the new government says it would like to

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Wall Street Mega-Landlords Piled into Spain’s Rental Property Boom, and Now it Hits a Wall?

May 24, 2018

Blackstone Group, Cerberus Capital and others face a problem.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Demand for rental housing in Spain may have hit a wall, so to speak, while supply remains more or less unchanged, according to a new study by the real estate agency Fotocasa: Last year, 14% of Spanish adults had rented or were looking to rent a new property; this year, this figure has slumped to 9%.
The most notable reduction occurred in the youngest age range (18-24) where the number of people who had rented a new property or were looking to rent one plunged from 29% to 15% in the space of just one year. In the 25-34 year-old demographic the demand for rental property fell from 28% to 19%.
There doesn’t appear to have been a concurrent shift in demand to the

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Furious Customers Leave in Droves after Botched IT Revamp at UK Bank TSB as Nightmare Drags on for a Month

May 22, 2018

“It is unacceptable for banks not to keep our accounts safe.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
UK Bank TSB’s unending IT nightmare is beginning to take a toll on the bank’s financial health. Analysts say the chaos caused by the botched IT upgrade will cost tens of millions of pounds in fines and compensation. And that’s based on the rosy assumption that the problems the upgrade has caused will be remedied in the near future. For the moment there’s little sign of that happening. And this nightmare has been dragging on for a month now — April 24: “Day 5”, April 30: “Contagion Fears,” and May 6: “Internal Revolt.”
Many TSB mortgage account holders are still unable to access their online accounts while business customers continue to have difficulty making

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Three External Tailwinds Turn into Headwinds for Spain’s Economy

May 17, 2018

With impeccable timing, all at the same time.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The Spanish economy has been growing at a fair clip since emerging from the deepest depths of recession at the tail-end of 2013. But the good times could soon be over, as the external economic environment becomes a lot less amenable to its needs. As the Spanish daily El Mundo recently pointed out, the three main external tail-winds that helped sustain the recovery — the rise of geopolitical risks affecting rival tourist destinations, the ECB’s expansionary monetary policy, and super-low oil prices — are beginning to change direction. And potentially all at the same time.
1. Peak Tourism.
Judging by the explosion of tourism phobia in the last two or three years, Spain’s tourist

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Strange Things Are Happening in Mexico’s Banking System

May 15, 2018

Rumors and denials proliferate, as millions of pesos disappear.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
On Sunday it was the turn of Mexico’s second biggest lender, Citibanamex, to be the target of customers’ ire after suffering a system failure that made it impossible for customers to withdraw money from ATMs, pay with their credit or debit cards, or access their online accounts. The incident is estimated to have affected roughly 4.3 million people. On Sunday night, the bank, which is majority owned by Citigroup, announced that the problems had been resolved.
But by Monday morning, a whole new problem had arisen. Customers of Mexico’s biggest bank, BBVA Bancomer, owned by Spanish banking group BBVA, had begun reporting problems accessing the bank’s mobile

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Who’s Most Afraid of a Latin American Debt Crisis (Apart from Latin America)?

May 12, 2018

It’s not just countries that are at risk of contagion.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Economic history appears to be rhyming once again in Latin America. Perennial credit-basket-case Argentina was one of the first countries to suffer a major currency crisis this century. Now, its government has asked the IMF for a brand-new bailout. But if this classic last-gasp fix was meant to calm the markets, it isn’t working.
Previous Latin American debt crises have taught us two things:
The direct impact on the general populace, already suffering from sky-high poverty rates, is devastating;
Once the first domino falls, contagion can spread like wildfire.
The debt crisis of the early 1980s, which spread to virtually all corners of the region, famously paved the way

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Airbnb Turns to Brussels for Help as Anti-Tourist Backlash Intensifies in Europe

May 9, 2018

The trend in its European markets is not Airbnb’s friend.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Airbnb has a big problem on its hands in Europe, its most important market for listings. The region’s bustling tourist destinations are growing increasingly disaffected with tourist rental property platforms as the cons of unfettered tourism — a squeezed housing market, surging rents, overcrowding, overstretched public services and infrastructure, and the erosion of the town or city’s distinctive character — begin to heavily outweigh the pros.
Even one of the supposed main benefits of mass tourism — job creation — is riddled with caveats. As a spokesman for a new campaign group, the Network of Southern European Cities in response to Mass Tourism, points out, “the

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Mexican Consumers Demand End to Made-in-Mexico Death-Trap Vehicles

May 7, 2018

A question of lives and money.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Consumer associations in Mexico have launched a new campaign aimed at the 10 best-selling brands in the country — Chevrolet-General Motors, Fiat, Ford, Honda, Hyundai, Mazda, Nissan, Renault, Toyota and Volkswagen. Its message is clear: Stop selling death-trap vehicles that do not include even the most basic safety features that have been mandatory in more advanced economies for years over even decades.
Mexico is the seventh largest vehicle manufacturer in the world. In 2016 it produced just over 3.5 million cars, placing it directly above Spain (8th), Canada (9th) and Brazil (10th) and just below India (5th) and South Korea (6th). Many of the cars it produces include the most advanced

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As IT Fiasco Drags On, UK Bank’s Next Big Problem Could Be Internal Revolt

May 6, 2018

It’s time for executive bonuses. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In my last article on UK lender TSB’s escalating IT nightmare, posted last Saturday, I signed off with a sarcastic remark about how, in the absolute worst case scenario, TSB’s senior executives may even lose their bonuses. It was meant as a joke. Surely TSB’s management would realize that awarding themselves massive bonuses as the chaos and financial pain caused to customers by their own botched IT upgrade continues to mushroom would be an unmitigated PR disaster. Wouldn’t they?
During questioning on Wednesday TSB’s chairman Richard Meddings did tell UK’s Members of Parliament that TSB’s CEO, Paul Pester, would be missing out on a £2 million bonus related to the IT project, which had been

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UK Bank’s IT Disaster Enters 2nd Week, Contagion Fears Rise

April 30, 2018

“This turned what was a super-hard systems job [into] a clusterfuck in the making.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Customers of UK bank TSB have probably lost track of the number of times the bank has declared its new online system, Proteo4UK, to be operational, only to find that they cannot log on. Even today, seven days after the system was supposed to be up and running and ten days after work to complete the migration began, and six days after we lambasted the banks for this fiasco, many of the customers are still unable to access their online accounts or make payments.
At the end of last week, TSB’s CEO Paul Preston announced he was drafting in a crack unit of IT technicians from IBM to “put things right” once and for all, no doubt at substantial

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