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Global financial institutions are becoming increasingly reliant on the cloud — using it to store customer-account data and their banking systems, leading supervisors to fret about what might happen if a bank collapses.
As well as cyber risk, regulators are worried about concentrating so much information in the hands of Amazon, Google and Microsoft — the three big companies that dominate cloud provision — without the same level of supervisory oversight as banks, according to people familiar with regulatory discussions.
The Bank of England is considering whether to test banks’ resilience this year, analysing what would happen if access to the cloud were disrupted. The BoE’s Prudential Regulation Authority is also expected to publish more detailed thinking on the subject as a prelude to possible regulation. Meanwhile, the United States Office of the Comptroller of the Currency is reviewing banks’ relationships with third-party vendors, including cloud providers.
EU watchdogs have also had discussions with tech companies in recent weeks, according to people familiar with the situation, and have asked to see commercial agreements with banks.
Regulators were most concerned about continuity of service for customers in the event of a problem, and for banks to have the ability to move off the cloud and back on to their own databases, those people added.
“Given regulators’ increasing concerns about operational resilience, they are bound to scrutinise systemically important firms’ use of the cloud,” said David Strachan, a former regulator at Deloitte.
The fresh scrutiny comes as Big Tech faces growing headwinds, from how personal information is used and stored, to the dissemination of misinformation and propaganda, to how much tax they pay and where. There have been calls from politicians around the world for more rigorous regulation.
Meanwhile, banks have an uneasy relationship with their tech providers and senior bankers have called for a more level playing field: on the one hand, they are providing valuable services and products, but on the other they are increasingly competing with them for customers. Amazon offers payment services and loans for merchants on its website, while Facebook recently secured an electronic money licence in Ireland.
Europe’s introduction this year of “open banking” regulation, which forces lenders to provide access to accounts of customers who authorise it, has also left senior bankers worrying that tech groups will cherry-pick the best parts of their business.
Full article on Financial Times (subscription required)