(Reuters) - Royal Bank of Scotland's Irish unit, Ulster Bank, was fined 3.5 million euros (2.7 million pounds) by Ireland's Central Bank on Wednesday for a system crash that deprived customers of basic banking services for almost a month.

The 2012 computer systems fiasco - which also led to online banking and payment problems for millions of RBS customers in Britain when a software upgrade went wrong - cost Ulster Bank 59 million euros in compensation.

The central bank found that Ulster did not have robust governance arrangements in place for its IT systems, causing widespread and significant loss to customers and threatening confidence in the operation of the retail banking sector.

The central bank said its findings had been accepted by the bank as part of the settlement agreed between the two. It said the fine was the highest imposed to date under its Administrative Sanctions Procedure.

"The summer of 2012 saw an unprecedented disruption to banking services. The major breakdown as a result of IT failings is completely unacceptable," the central bank's director of enforcement, Derville Rowland, said in a statement.

The central bank's head of credit institutions supervision warned on Tuesday that banks whose IT systems are already under strain will need to make significant investment if they want to do more of their business electronically.