Financial regulators in the UK are reportedly planning to increase monitoring of cloud computing providers to prevent potential disruption of the banking system due to hacking or service outage.
With this objective, the Prudential Regulation Authority (PRA) is looking to access more data from Amazon, Microsoft and Google, which dominate the cloud computing space, the Financial Times reported citing sources.
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The data is expected to give a clear picture of the operational resilience of their services in an unforeseen event such as a cyberattack.
Notably, cloud computing has recorded significant growth as more and more firms are moving their data and IT services to third-party servers run by these tech giants.
Several UK lenders have partnered with these technology vendors to upgrade their infrastructure and reduce operational costs, which falls within PRA’s operational resilience framework.
However, the authorities are concerned about the scale of damage a system failure or a cyberattack could cause on the banking system.
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By GlobalDataTo address this, the PRA is planning to introduce more stringent outage and disaster recovery tests, the people said adding that dependence on a few service providers is also worrying.
“We are looking at cloud providers from an operational resilience perspective,” one of the sources told the publication. “Do we need to step in more, how do we get confidence in them? We are starting to consider them critical third parties that we need more oversight of.”
The issue was highlighted during the Bank of England’s Financial Policy committee meeting in September 2021.
This minutes of BoE’s meeting stated that “the increasing criticality of the services that critical third parties provide, alongside concentration in a small number of providers, pose a threat to financial stability in the absence of greater direct regulatory oversight.”
The recent outage at Amazon Web Services has only added to concerns of regulators around the world.
The PRA, BoE and the Financial Conduct Authority will publish a joint discussion paper on the concerns raised by cloud technology this year.
Google expressed its willingness to work with financial services customers and regulators on the issue, while Amazon Web Services has stated that the security of its cloud services is its “highest priority”.
