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LONDON, August 20 (Reuters) – For more than a decade since the financial crisis, regulators have once again been deceived into believing that some companies at the heart of the financial system are too big to fail. But they are not banks.
Technology giants, including Google (GOOGL.O), Amazon (AMZN.O), and Microsoft (MSFT.O), are hosting the growing cloud, insurance and marketing operations on their vast cloud platforms that are constantly on the lookout for watchdogs. at night.
Central Bank sources told Reuters that the speed and scale at which financial institutions move critical services such as payment systems and online banking to the cloud is a change in risk.
“We are only at the beginning of the symbolic transition, so we need to make sure we have the right solution,” said a financial regulator from the seven-member group, who declined to be named.
A closer look at Big Tech’s global reputation is a recent sign that financial regulators are joining the ranks of their data and competitors.
Banks and technology companies say the use of cloud computing is more beneficial because it provides faster and cheaper services that are more resistant to hackers and hackers.
But regulatory sources fear that a crash at a cloud company could derail key services in many banks and countries, undermining customers’ access to payments or services and weakening their confidence in the financial system.
Banks are the US Treasury, the European Union, the Bank of England and the Bank of France to reduce the risk of “locking” or over-reliance on small technology companies and companies. On a cloud provider.
“We are very vigilant to bring things down,” said Simon McNamara, chief executive officer of Bank of England’s NatWest (NWG.L). If 10 organizations are not prepared and connected to a missing supplier, then we all have a problem.
EU He suggested that the financial industry’s “critical” external services, such as the cloud, should be monitored to strengthen the export recommendations of the factory by September 2017.
The Bank of England’s Financial Policy Committee (FPC), meanwhile, said it wanted more understanding of the agreement between banks and cloud operators and that the Bank of France should have a clear contract with foreign lenders last month.
“Further policy measures are needed to alleviate financial security concerns in this area,” the FPC said. Read more
The European Central Bank, which controls the largest lenders in the eurozone, said on Wednesday that the cost of banking on cloud computing will increase by more than 50% in 2018.
And that’s just the beginning. Global spending on banks’ cloud services is projected to double from $ 32.1 billion by 2020 to more than $ 85 billion by 2025, according to Reuters.
Only six cloud service providers worldwide have been identified by IDC survey of 50 major banks – IBM (IBM.N), Microsoft, Google, Amazon, Alibaba (9988.HK) and Oracle (ORCL.N).
Amazon Web Services (ASS) – the largest cloud provider according to Senior Group – posted $ 28.3 billion in six months through June, up 35% from last year and $ 25.7 billion from 2018.
While all industries are raising cloud costs, analysts told Reuters that online banking and emergency loan plans exploded and financial services companies moved quickly after the outbreak.
“Banks are still very active, but they have achieved a high level of comfort and are moving fast,” said Jason Malo, an advisor to consultants.
No more secrets
Supervisors are worried that cloud failures will cause banking systems to fail and people to lose their money, but they say they have little visibility on cloud providers.
Last month, the Bank of England said that big technology companies could set contracts and conditions for financial companies and that they did not always provide enough information to their customers to control risks – and that “confidentiality” had to end.
There is also the risk that banks will not be able to adequately distribute their risk among cloud providers.
Google told Reuters that a recent study found that one financial company was using less than five clouds, although 88% of those who did not spread their risk planned to do so within a year. Read more
According to central bank sources, the solution may be a one-size-fits-all approach to mitigating the sector’s overall cloud service vulnerability – with the central bank’s regulatory backing point.
In a draft directive to lenders last month, the US Federal Reserve said, “Regardless of the division of regulatory responsibilities between the cloud service provider and the bank, the bank is ultimately responsible for the effectiveness of the regulatory environment.”
FINRA, which controls Wall Street brokers, released a report on Monday to ensure that the use of the cloud does not hurt the market or investors.
FINRA reports that it is easier to communicate with cloud providers when needed, but it is easier said than done and can cause disruptions to business.
“Book is with us.”
Banks and technology companies oppose the idea that the cloud’s further adoption is endangering the infrastructure of the financial system.
Adrian, director of financial services for Google Cloud Financial Services in the United Kingdom and Ireland, said the cloud could be more effective than building the bank’s security at home.
British digital lender Zopa says it is moving 80% of its transactions to the cloud and is working to reduce risks. Zopa CEO Jadev Janard and his company say they are deliberately supporting the technology industry.
“Cloud providers invest as much resources in security as few private companies can manage,” he said.
He said Google is open to working closely with financial regulators.
Instead of waiting for banks to push data to them on a regular basis, we may one day see banks pulling information on demand from cloud-controlled application interface (APIs).
He said the bank is working closely with technology companies and regulators to alleviate the dangers of NatWest McNamara and has put in place alternative services in case things go wrong.
“The money will stay with us,” Mcnamara said. “We don’t put all our eggs in one basket.”
One problem, however, is that not all banks are fully aware of the risks involved in mass transitions, according to Forrest senior analyst Jopper Hopperman, especially small lenders.
“Some banks do not have the necessary knowledge,” he said. They think that doing so will ruin all their problems, and that is not true.
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Report by Iain Withers and Huw Jones; Additional report on the price of the Michel and the Francesco Kanepa in Frankfurt; Edited by Rachel Armstrong and David Clark
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