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Cloud providers face scrutiny over work in banking sector

Amazon, Microsoft and Google could face new regulations under plans proposed by US lawmakers to strengthen scrutiny of the cloud computing platforms used by banks.

Two US Democratic House Representatives have urged the US financial services regulator to treat the platforms in the same way as other “systemically important” financial utilities such as payments.

In a letter to the regulator, Democratic House Representatives Katie Porter and Nydia Velázquez write: “Cloud services have become an essential element of our modern banking system and should be overseen commensurately.”

“Cloud services are not currently subject to an appropriate and enforced regulatory regime,” the letter, first reported by Reuters states.

European regulators have also expressed concerns about banking infrastructure being propped up by a small number of tech companies. A report published by the European Banking Authority last year stated: “[Cloud computing] could be also considered important, not only from the point of view of individual institutions but also at an industry or systemic level, as large suppliers of cloud services could become a single point of failure should many institutions rely on them.”

It added: “For applications for which security is of prime concern, a private cloud could be considered preferable, as it allows the most flexibility in data processing and security. On the other hand, private clouds are typically less scalable and more expensive than public clouds.

“As a result, some institutions may prefer a hybrid model, where some activities could be performed in the public cloud while more sensitive activities (including hosting of sensitive data) could be performed in a private cloud.”

The Bank of England is also reported to be preparing to publish guidance on the subject.