New rules needed to cover risks from cloud computing, says Bank of England

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LONDON, October 8 (Businesshala) – New rules needed to address the operational risks of banks relying on outsourced ‘cloud’ computing from Amazon (AMZN.O), Google (GOOGL.O), Microsoft (MSFT.O) and others Will be To provide services to customers, the Bank of England said on Friday.

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The BoE’s Financial Policy Committee will continue to have “primary responsibility for managing risks arising from outsourcing and reliance on third parties to regulated firms.”

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“However, additional policy measures, which require certain legislative changes, are likely to be required to mitigate financial stability risks stemming from concentration in the provision of certain third party services.”

Measures should include the ability to designate certain third parties as ‘critical’, which means they will need to meet ‘resilience’ standards that will be regularly tested.

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The BOE and the Financial Conduct Authority are due to publish a discussion paper on the subject next year. The measures are similar to EU law now making its way through the approval process.

“These trials and field exercises from significant third parties could potentially be carried out in collaboration with foreign financial regulators and other relevant UK authorities,” the BoE said.

The BoE had already cautioned about the cloud and is now checking banks for their “exit strategy”, or how quickly they can switch to an alternative cloud provider or in-house back up if there is a cloud outage. It is for clients to avoid disruption, said consultant KPMG.

This has already prompted banks to think about the business case for cloud in some services, and whether it will get the green light from regulators.

“Trying to replicate this service on campus or in a different cloud really doubles your cost,” said Mark Korns, director of technology consulting at KPMG.

Korns said that banks that moved to the cloud early need to “retrofit” flexibility.

“What we’re seeing is a more tentative approach to moving to the cloud. Now we’ve got this clear guidance from regulators, which is challenging banks to figure out what and how they benefit, Corns said.

Reporting by Hugh Jones, Editing by Lewis Heavens

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