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Cloud outsourcing, where companies store information and use software via shared virtual data and processing services, rather than relying on local servers, is becoming increasingly popular.
In a report published last year, Bank of England (BoE) committed to considering the benefits and risks of cloud use across financial services firms.
BoE surveyed the 30 largest banks and 27 largest insurers that it supervises to understand how they use the cloud.
Its survey shows that banks and insurers mainly use cloud outsourcing to run software and access additional processing capacity (Software-as-a-Service or SaaS) or to support IT infrastructure (Infrastructure-as-a-Service or IaaS). The survey indicates that banks use cloud outsourcing more widely than insurers. For both banks and insurers the use of SaaS outweighs the use of IaaS.
Using the cloud allows businesses to work in a more agile way, with cloud services offering speed, security and flexibility. From file sharing to managing fraud, firms use the cloud for a wide range of processes, both simple and complex.
In December 2019, the Prudential Regulation Authority issued a consultation paper that sets out BoE‘sexpectations on outsourcing, including the use of cloud. This paper explains how BoE considers cloud in its supervisory oversight, including the potential for concentration risk. Its survey indicates that for banks and insurers, the provision of IT infrastructure in the cloud is already highly concentrated.