08 February 2022

UK financial regulators are stepping up their scrutiny of cloud computing providers amid growing fears that an outage or hack of their services could severely harm the nation’s banking system.

The Prudential Regulation Authority (PRA) is exploring ways to access more data from the major cloud providers Amazon, Microsoft and Google, including on the operational resilience of their services.

All three companies have in recent years struck deals with UK banks, which have turned to them to reduce IT costs, overhaul antiquated infrastructure and capitalise on technologies such as AI to automate customer service and detect financial crime.

The trio dominate cloud computing, a global market that has boomed as more companies transfer data and IT services to third-party servers run by Big Tech. Moreover, the UK’s banking sector has become heavily reliant on them.

It is understood that the PRA is set to publish a joint discussion paper with the Bank of England and the Financial Conduct Authority on issues raised by cloud computing.

Consultancy McKinsey has forecast that 40%-90% of banks’ IT operations globally could move to the cloud within a decade.