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Regulators Target “Too Big to Fail” Cloud Tech Giants

Regulators Target “Too Big to Fail” Cloud Tech Giants

(20 August 2021 – Europe) Regulators are growing increasingly alarmed that major cloud computing technology groups such as Amazon Web Services (AWS), Google and Microsoft Azure hosting a growing critical mass of bank, insurance and market operations at the centre of global financial markets could be “too big to fail”.

Reserve banks across the United Kingdom (UK), European Union (EU) and United States (US) believe the speed and scale at which financial institutions are shifting core systems such as payments and eBanking on to the cloud has significantly escalated potential risks. Bank cloud tech spending is set to expand sharply to US$85 billion by 2025 according to the International Data Corporation (IDC) and regulators across multiple jurisdictions are clamouring for greater oversight of inherent cloud risks. IDC research found of 50 major global banks they utilised only six primary providers of cloud services including AWS, Google Cloud Platform, Microsoft Azure, IBM Cloud, Alibaba Cloud and Oracle Cloud Infrastructure (OCI).

The Bank of England (BoE), Bank of France, European Union and US Treasury are increasing their scrutiny of cloud technology to mitigate the risks of banks relying on a small group of tech firms and companies being "locked in", or excessively dependent, on one cloud provider in the ceaseless pursuit of reducing costs to cope with rising “jaws” in the prevailing low interest rate environment.

The BoE Financial Policy Committee (FPC) is demanding greater insight into agreements between financial institutions and cloud operators while the Bank of France informed lenders in July they must have a written contract that clearly defines controls over outsourced activities.

"We're very alert to the fact that things will fail. If ten organisations aren't prepared and are connected into one provider that disappears, then we'll all have a problem. The bank is collaborating closely with tech firms and regulators to mitigate risks, and has put alternative services in place in case things go wrong. The buck stops with us. We don't put all our eggs in one basket” commented NatWest Chief Administrative Officer, Simon McNamara.

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