Bank warns massive move to cloud poses ‘systemic risk’ to UK financial system

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HE Bank of England today warned that the massive shift to cloud computing posed a potential risk to the financial system.

Like most businesses, banks have switched to cloud services as customers flocked to online banking during the Covid crisis.

The Bank warned that the small number of cloud infrastructure providers posed a systemic risk and called for measures to be taken to increase the diversity of the offering.

Amazon Web Services hosts 32% of the cloud, Microsoft Azure 20%, and Google Cloud 9%. Behind them are much smaller vendors IBM, Salesforce, and Tencent.

The bank said the Treasury and the Financial Conduct Authority were reviewing the issue of cloud computing risks, but stressed that international standards would likely be needed to deal with the growing threat.

The alert comes just a month after a massive global outage caused by US-based cloud computing service provider Fastly, which brought down scores of websites, such as Twitter, Spotify, Reddit. and many media sites.

The Fastly problem and a number of small web outages since have underscored just how vital a small number of behind-the-scenes businesses have become to making the internet work.

Bank Governor Andrew Bailey said that “the growing reliance on a small number of CSPs (cloud service providers) and other critical third parties could increase financial stability risks without oversight increased direct regulatory resilience of the services they provide “.

He added that “additional policy measures to mitigate financial stability risks in this area are needed”.

A major concern for the Bank is the level of secrecy and the lack of transparency within cloud computing providers, as companies wish not to be exposed to cyber attacks.

He said that while “we don’t want hackers to get the guide”, “we have to find a balance.”

“In terms of resilience standards and testing those resilience standards, frankly we’re going to have to roll back some of that, that secrecy that goes with it. It is not in line with our objectives, ”he said.

Bailey also pointed out that the lack of competition in the market and reliance on cloud computing for basic banking services could see major vendors dictating terms and prices.

He said, “This condition-focused power can manifest itself in the form of secrecy and not providing customers with the information they need to monitor risk in the service.”

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