CHALLENGER bank TSB has attempted to draw a line under the problems caused by its botched IT upgrade in April after announcing it is parting company with chief executive Paul Pester.

The bank said yesterday that Mr Pester was standing down and leaving the company after seven years in charge in the wake of fresh problems at the firm.

Read more: MPs advise TSB board to consider sacking chief executive

The lender faced complaints on Monday that people had been unable to access their accounts. Some 1.9 million people using its digital and mobile banking were locked out following the problems in April.

Mr Pester will receive a payoff worth at least around £1.7 million.

TSB’s chairman, Richard Meddings, has taken charge while the bank searches for a new chief executive.

Mr Meddings insisted Mr Pester had made an enormous contribution to TSB, helping it become one of the UK’s strongest challenger banks. “He’s not the fall guy,” said Mr Meddings, adding: “This is a mutual agreement within the board.”

Read more: City regulator tells of 'frank exchange' over TSB chaos

However, he underlined the scale of the challenge facing the bank.

“Although there is more to do to achieve full stability for customers, the bank’s IT systems and services are much improved since the IT migration,” said Mr Meddings.”Paul and the board have therefore agreed that this is the right time to appoint a new chief executive for TSB.”

Mr Pester said it had been a “privilege” to lead the bank, but admitted the past few months had been challenging for everyone at TSB.

The developments at TSB will be studied with interest by its giant rivals.

After the £1.7bn takeover of TSB by Sabadell in 2015, Mr Pester said the Spanish firm’s firepower would help the firm build on its position as Britain’s challenger bank.

In February he said the £775 million programme launched by Royal Bank of Scotland to boost competition in the small and medium sized enterprise market presented a once in a generation opportunity to break the shackles of the big banks’ dominance.

Read more: Royal Bank handouts will 'break the shackles' says TSB chief

RBS has faced IT challenges. In 2014 the bank was fined £56m over an IT meltdown which locked customers out of their accounts.

TSB is a leading player in the personal current account market in Scotland. A survey by market research firm Kantar TNS in June found it ranked third in Scotland with 13 per cent of main personal current accounts, against 22% for Lloyds Banking Group-owned Bank of Scotland and 19% for RBS.

TSB has 155 branches in Scotland, down from 181 when Sabadell bought it. The bank has 1,070 employees in Scotland.

The firm had 188 branches in Scotland in 1998 when it merged with Lloyds.

It was spun-off in 2013 after a deal to sell what was known as the Project Verde portfolio to Co-operative Bank collapsed.

Lloyds was forced by the European Commission to offload more than 600 branches after receiving a £20.5bn bail-out by the UK Government during the financial crisis.

RBS launched the £775m competition support programme to help address regulators’ concerns about the £45bn bailout it received.

The IT problems in April came after TSB switched five million customers from a Lloyds system to one developed for Sabadell.

Mr Pester has faced fierce criticism, with MPs on the Treasury Select Committee calling for him to be sacked.

He will receive £1.2m pay in respect of his 12-month notice period and a £480,000 award dating from before Sabadell bought TSB. The bank said the release of variable pay to Mr Pester will take into account the outcome of performance conditions and ongoing regulatory and independent investigations.

Mr Pester waived a £2m bonus following the IT outage. TSB incurred £176m costs in respect of the problem in its first half, dragging it £107m into the red.