Banco Sabadell has signed a $1 billion deal with IBM to lead an upgrade of its IT systems, including those of UK subsidiary TSB, over the next ten years.

The Spanish banking giant said that the agreement would enable it to use IBM’s cloud capabilities to accelerate digital transformation and develop a modern technology platform that integrates all its data and applications to meet growing consumer demand for digital and app-based banking services.

IBM and recently acquired cloud division RedHat will also oversee the migration of all of Banco Sabadell’s exciting applications to a hybrid cloud environment, which will enable it to meet required standards of cybersecurity as well as changing regulatory standards.

UK affiliate TSB, has also signed a contract with IBM to manage services across the bank’s core banking systems as it seeks to restore its reputation following a botched IT migration in 2018.

This resulted in multiple glitches which left two million customers locked out of their accounts and led to the resignation of chief executive Paul Pester.

The transfer of responsibility for IT and cloud services to IBM comes after Debbie Crosbie, who replaced Pester as chief executive, announced plans to invest £120 million to transform digital channels over the next three years.

A statement from TSB said: “By hosting and managing select services on a private cloud, operated by IBM, TSB will be able to strengthen IT resilience and leverage higher value technology, including AI, to deliver new innovative cloud-native services to its customers.”

All of TSB’s core banking channels and applications including ATMs, internet banking, mobile banking and high street branches will now run on a unified cloud platform, offering improved data security.

Sabadell said the deal with IBM had been undertaken as the financial services industry faces “intense challenges” from regulatory compliance and new, digital business models led by challenger banks as well as automation.

Miguel Montes, Banco Sabadell’s chief operations and people officer said: "This agreement with IBM helps enable us to advance into the modernization and transformation of our technology infrastructure and in the simplification of our operational model.”

He added: "With this, we are not only continuing to increase our resilience, security and scalability capabilities, but we can also adopt key elements of the new technology paradigm like cloud, the intense use of data and artificial intelligence."

TSB will also open a technology center in Edinburgh to handle all of its banking data, creating 90 jobs.

TSB’s Chief Operating Officer, Suresh Viswanathan, said: “Our partnership with IBM marks the next exciting phase in our tech transformation. At a time when both the pace of change and the customer demand for new services is increasing, our partnership ensures our digital offering remains competitive and allows us to act faster to meet the needs of TSB customers.”

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