And then they hire these people, starting with the lowest numbers.

What this VP should have been doing was figuring out how to get out of that scenario entirely.

Well the VP probably knew that 1) The company (couldn't afford | didn't want to spend) to build a new replacement system. 2) New people would be needed to maintain the existing system 3) Students don't know how much their services would be worth - so the amount might not be big enough as a regular engineer might charge.

Well VP could have been exaggerating a bit as well since we were uni students back then and my friend was doing his internship there. He knew the VP through robotics.

Note that, in a bank, VP is not a particularly important position. A senior software developer anywhere else might have the VP title in a bank. It is very possible that your firend's friend wasn't involved in any hiring decision at all and it was just internal hearsay.

Source: I'm VP at a large bank.

Ah could be that as well, you know better. We were just young kids (still are) and believed what he said.