Yes, they do; I won't name names because it's from personal experience, but I've seen all maintenance of the core banking system outsourced (e.g. to IBM), I've seen the development/maintenance of the core banking system (which many banks buy from outside vendors, most banks do some customization but many have a commercial system as the base, not some unique fully home-grown solution) go to heck because the vendor moved most of their maintenance from the existing (presumably expensive) teams to cheap overseas engineers which weren't very effective for various reasons; I've also seen banks doing offshoring without outsourcing (i.e. make up an IT department in a 'cheap' country where they don't really do banking) and outsourcing without offshoring.
It's definitely not the case where it's all in-house. Some organizations do, some don't, and there are so many banks (and so many different types&sizes of banks) in the world that every option is represented.
I should have been more specific: When I wrote "maintenance" I was thinking more of "the people in charge of keeping things running on a daily basis and who solve crisis situations". Of course I don't believe that banks build all of their computer systems from the ground up themselves.
But even after narrowing it down to that your stories make me think I had too much faith in the banking system.
It's definitely not the case where it's all in-house. Some organizations do, some don't, and there are so many banks (and so many different types&sizes of banks) in the world that every option is represented.