In a survey on the state of financial systems, the Bank of England (BoE) expressed concerns that the UK’s banks are moving more and more of their administration and accounts online, warning that the cloud could pose a risk to financial stability.
They have previously raised concerns that the market for cloud services is highly concentrated, with companies such as Microsoft and Amazon Web Services (AWS) heavily dominating. Ministers have also previously questioned the government’s own reliance on those two tech giants. However, the organisation’s concerns have been repeated due to the pandemic, which has seen financial institutions accelerate digital transformation plans and increase their reliance on cloud service providers (CSPs).
“While I understand cloud providers’ desire not to reveal too much publicly about their operations in case it opened the door to cyberattacks, firms needed to give more information to regulators and customers,” Andrew Bailey, governor of BoE, said. “That concentrated power on terms can manifest itself in the form of secrecy, opacity, not providing customers with the sort of information they need to monitor the risk in the service.”
The Prudential Regulation Authority and Financial Conduct Authority have strengthened regulations regarding operational resilience and third-party risk management but, according to the report, the increasing reliance on a small number of CSPs could increase financial stability risks without greater direct regulatory oversight of the resilience of those provider’s services.