The problems for Cahoot.com came at the same time as Prudential floated a minority stake in its internet bank, Egg.com, on the London Stock Exchange. Some retail investors were unable to sell their Egg shares for a short time because incomplete account numbers had been supplied.
Howard Davies, Chairman of the FSA identified the key risks which banks must manage as they introduce and develop their e-banking services. He said that: “There is a risk that people with strong technological, but weak banking skills can end up driving e-initiatives,” and added, “E-banks are easy to set up, so lots of new entrants are arriving on the scene. And old-world systems, cultures and structures do not encumber these new entrants.”
Davies said the FSA had at times found “poor security” in e-banking initiatives. He said the FSA is “encouraging banks to look at the firewalls between their different systems to ensure adequate damage limitation should an external breach occur.”
He said that many banks going on-line have significantly misjudged volumes of traffic, usually making estimates which turn out to be too cautious. He also pointed to the security risks that could arise in outsourcing the development work.
Cahoot.com has said that customer security was not at risk as there were no registered customers at the time of the system crash.