UK financial regulators to step up scrutiny of cloud computing giants risking FIs

UK financial regulators are preparing to increase monitoring of cloud computing providers as service outages and hacks increase the risk of significant disruption to cloud computing-dependent banking systems.

The Prudential Regulation Authority is looking for ways to access more data from cloud providers Amazon, Microsoft and Google. This includes the operational resilience of the service.

The trio dominates cloud computing, a fast-growing global market as more companies transfer data and IT services to big tech-operated third-party servers.

All three have recently signed contracts with British banks. British banks are leveraging technologies such as IT cost reductions, outdated infrastructure overhauls, and AI to automate customer service and detect financial crimes.

The use of cloud computing by British banks is covered by PRA’s operational resilience framework, but the turmoil that can be unleashed if one or more services fail or are simultaneously hit by a cyberattack. There is growing concern about the size of the. ..

Regulators are also considering implementing more robust outages and disaster recovery tests, according to people familiar with the PRA’s plans. Customer data security remains the number one concern for regulators, but people say that the reliance of UK banks on a small number of providers has also emerged as a concern.

“We are looking at cloud providers in terms of operational resilience,” said one familiar with regulatory planning. “Do we need to go further, how can we build confidence in them? We are beginning to see them as important third parties who need more oversight.”

A potential threat to the financial sector was highlighted in early December when the outage of Amazon’s cloud arm, Amazon Web Services, struck a wide range of companies across robot vacuum maker Roomba and dating app Tinder. rice field.

Disability regulators, which have been in the spotlight around the world since then, are even more focused on the cloud, according to executives from a major US bank operating in the United Kingdom.

The PRA will publish a joint discussion paper with the Bank of England and the Financial Conduct Authority on issues raised by cloud computing this year, but concerns are raised at a meeting of the BoE’s Monetary Policy Committee to monitor last September. Already highlighted in the minutes of. Fiscal stability risk.

The Minutes “The growing importance of services provided by critical third parties poses a threat to financial stability in the absence of greater direct regulatory oversight, along with a focus on a small number of providers,” he said.

The PRA refused to comment on the plan.

“We are committed to working with financial services clients and regulators to provide management and assurance of risk management, data locality, transparency and compliance,” Google said. 

Amazon Web Services states that cloud service security is a “top priority.” Microsoft did not respond to the request for comment.

Regulators are facing the UK banking system, which is rapidly being reshaped by big tech companies. Amazon Web Services has attracted the attention of Barclays and HSBC, and Lloyds Banking Group has announced partnerships with both Google Cloud and Microsoft Azure.

Consultancy McKinsey predicts that 40-90% of the IT operations of banks around the world could move to the cloud within 10 years.

British bank data centers have historically been the subject of regular regulatory “failover” tests on Sundays. This required the lender to show that data could be transferred between servers immediately.

As many banks now share the same cloud provider instead of running their own IT operations, executives are more broadly tuned to allow PRA to model Amazon Web Services and Azure failures at the same time. I’m hoping to develop a “game”.

“This is a wicked problem, [regulators] I’m very nervous and have spent a lot of time in recent discussions, “said a senior UK banker. “All seven UK banks are cloud heavily. We always go to the same three or four suppliers that are not directly regulated.”

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By julesmenten, January 9, 2022, Published on California News Times

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