International regulators investigating tech firms’ cloud dominance
The Financial Stability Board (FSB) is looking into the cloud services provided by technology firms including Microsoft, Amazon and Google, according to US Federal Reserve (Fed) governor Lael Brainard.
Brainard told the House Financial Services Committee that the Basel-based international standards body is concerned about the market dominance of technology giants in the cloud space.
MLex reports that the Fed governor said the FSB is looking into the ability of banks to switch to a second redundant cloud system should their main provider fail.
“There is technology out there or developing that would provide mechanisms to do so, so that lock-in is less of a risk,” says Brainard. “We need to hold our institutions accountable for making that risk assessment in a very well-informed way and taking that migration seriously.”
According to Gartner statistics Amazon Web Services (AWS) commands a 47.8% share of the infrastructure-as-a-service (IaaS) market, followed by Microsoft Azure (15.5%), Alibaba Cloud (7.7%), Google (4%) and IBM (1.8%).
The top five providers control around 77% of the IaaS market, which grew in value by 31.3% in 2018 to $32.4 billion.
Read more: The Amazon-ification of banking
The FSB published a report in February on the market structure of the financial services and technology sectors, and concluded that while reliance by financial institutions on third-party data service providers for core operations is estimated to be low at present it warrants “ongoing attention from authorities”.
“Financial institutions typically adopt a combination of cloud services across a vast and growing number of vendors depending on business needs and scalability considerations,” the FSB writes in its report.
“If high reliance were to emerge, along with a high degree of concentration among service providers, then an operational failure, cyber incident, or insolvency could disrupt the activities of multiple financial institutions.
“Thus, while increased reliance on third-party providers specialising in cloud services may reduce operational risk at the individual firm level (idiosyncratic risk), it could also pose new risks and challenges for the financial system as a whole.”
