Limited cloud providers could increase stability risks, warns Bank of England

An increasing reliance on a small number of cloud service providers (CSPs) could “increase financial stability risks” without greater regulatory oversight, a Bank of England report has found.

The Financial Policy Committee (FPC) has previously highlighted that the market for cloud services is highly concentrated among a few CSPs, which could pose a threat to financial stability.

Since the start of 2020, financial institutions have accelerated their plans to scale up their reliance on CSPs.

Although the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have recently strengthened the regulation of firms’ operational resilience and third party risk management, the bank said that the growing reliance on a limited number of CSPs and other critical third parties could heighten risks without better direct regulation of the services they provide.

The FPC is of the view that additional policy measures to mitigate financial stability risks in this area are needed, and welcomes the engagement between the Bank, FCA and HM Treasury on how to tackle these risks.

“The FPC recognises that absent a cross‐sectoral regulatory framework, and cross‐border co‐operation where appropriate, there are limits to the extent to which financial regulators alone can mitigate these risks effectively,” said the bank.

    Share Story:

Recent Stories

New Business Frontiers
FStech’s Mark Evans discusses the future of financial services with Liu Jianning of Huawei, covering the limitations that current thinking can impose, how financial institutions can embrace technology to be both agile and resilient, and making space for the organisation to focus on the job of creating innovative business models and on delivering business value for their customers.

The Future of Intelligent Finance
FStech Group Editor Mark Evans sits down with Jason Cao, President of Global Financial Services Business Unit, Enterprise BG at Huawei ahead of its Intelligent Finance Summit which was held on 3rd and 4th of June in Shanghai. This Q&A delves into key trends in digital transformation of the financial services industry as well as a look at how data, robotic infrastructure, intelligent storage and innovative technologies are shaping the future for FSIs.

Cracking down on fraud
In this webinar a panel of expert speakers explored the ways in which high-volume PSPs and FinTechs are preventing fraud while providing a seamless customer experience.