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UPDATE 1-NatWest opens on Sunday as IT glitch causes chaos
* RBS says most accounts should be back to normal by Monday
* Banks open on Sunday for first time in bank's history
* Over 7,000 staff drafted in to work this weekend
* System failure last Tuesday caused massive disruption
* CEO apologises, says customers won't be "out of pocket"
By Matt Scuffham
LONDON, June 24 (Reuters) - British bank NatWest opened 1,200 of its branches on a Sunday for the first time in its history as it struggled to address massive disruption for millions of its customers from a computer systems failure earlier in the week.
The bank, owned by part-nationalised Royal Bank of Scotland , opened the branches between 0800 GMT and 1100 GMT, having already extended its opening hours on Saturday, drafting in more than 7,000 staff to deal with the crisis.
NatWest is battling to get on top of a huge backlog of failed payments after a software upgrade on Tuesday night went wrong, resulting in the bank being unable to process payments for its personal and business customers.
In a message to customers published on the bank's website, Chief Executive Stephen Hester apologised for the "enormous disruption and inconvenience for millions of our customers as well as for many customers of other banks."
"I am very sorry for the difficulties people are experiencing. Our customers rely on us day in and day out to get things right, and on this occasion we have let them down badly. This should not have happened." Hester said.
Susan Allen, director of customer services at RBS, said on Sunday that most customer accounts should be back to normal by Monday but acknowledged some customers face more problems.
"I'm cautiously optimistic that RBS and NatWest customer account balances will be largely back to normal from tomorrow. The knock-on effects of this technical failure mean there will be bumps in the road. We will do everything we can to minimise further disruption to our customers," she said.
Allen said the bank will automatically waive any overdraft fees or charges on current accounts and will work directly with credit agencies to ensure customers' credit ratings are not damaged as a result of missed payments.
Hester said the bank's staff were "working around the clock" to resolve the problems and said affected customers would not lose out financially, raising the possibility that RBS could face hefty compensation claims.
"I want to be clear that where our customers are facing hardship or difficulty we can and will help them. I also want to reassure customers that no one will be left permanently out of pocket as a result of this and they should contact us directly about this," he said.
RBS, 82 percent owned by the government, is already facing a bill of over 1 billion pounds ($1.6 million) to compensate customers for the mis-selling of loan insurance.
The episode is a public relations disaster for NatWest, which could prompt customers to switch to other banks.
New entrants into Britain's retail banking sector, such as Metro Bank, Virgin Money and Aldermore, are looking to take disaffected customers from the biggest high street banks - RBS, Lloyds, Barclays, HSBC and Santander UK
Many Britons became disillusioned with the established banks following the financial crisis, angered by what they saw as excessive pay for executives and the stifling of credit while the country slid into a double-dip recession.
It is also a further embarrassment for Hester, who admitted in February he had considered resigning following a public outcry over a proposed 1 million pound bonus payment which he opted to waive after coming under pressure from politicians.
Labour finance spokeswoman Rachel Reeves called on the bank to "get a grip on this situation."
"It's causing real hardship at the moment, and to say 'we'll put it all right in the end' isn't really good enough," she told Sky News.
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