Bank warns wholesale shift to cloud poses a “systemic risk” to UK finance system

THE Bank of England today warned that the wholesale switch to cloud computing posed a potential risk to the financial system.

Like most businesses, banks have switched to cloud services as customers flocked to online banking during the Covid crisis.

The Bank warned the small number of cloud infrastructure providers posed a systemic risk and called for measures to be taken to increase the diversity of supply.

Amazon Web Services hosts 32% of the cloud, Microsoft Azure 20% and Google Cloud 9%. Behind them are far smaller providers IBM, Salesforce and Tencent.

The Bank said the Treasury and the Financial Conduct Authority are looking at the issue of risks from cloud computing, but stressed that international standards are likely to be needed to tackle the rising threat.

The alert comes just a month after a mass global outage caused by US-based cloud computing service provider Fastly, which caused a swathe of websites to go down – such as Twitter, Spotify, Reddit and a raft of media sites.

The Fastly problem and a number of smaller web outages since have underscored how vital a small number of behind-the-scenes companies have become to running the internet.

Bank Governor Andrew Bailey said this “increasing reliance on a small number of CSPs (cloud service providers) and other critical third parties could increase financial stability risks without greater direct regulatory oversight of the resilience of the services they provide”.

He added that “additional policy measures to mitigate financial stability risks in this area are needed”.

A major concern for the Bank is the level of secrecy and lack of transparency within the cloud computing providers, with the firms keen not to leave themselves open to cyber attacks.