UK Regulates Microsoft, Google and Other Cloud Providers
Synopsis
The government has brought major cloud providers under financial sector oversight to safeguard banks and other institutions from technology disruptions.
The UK government has imposed direct regulatory scrutiny on four of the world's biggest cloud computing service providers, including those that power banks and financial institutions. It comes after increasing fears about the financial industry's dependence on a handful of cloud infrastructure vendors.
UK financial services law will treat Microsoft Ireland Operations Ltd, Google Cloud EMEA Ltd, Amazon Web Services (AWS) EMEA SARL and Oracle Corporation UK Ltd as critical third parties from 13 July.
The prudential regulation bodies, the Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), will regulate the services that the companies offer to regulated financial services businesses.
Cloud Services Become a Financial Stability Focus
The new regime mandates that providers be designated and prove they can keep running critical cloud services during significant disruptions. The firms will be required to test their resilience, and to regularly assess to regulators, and report major events that might impact the operations of banks, insurers or financial market infrastructure.
The rules cannot supersede the duties of financial institutions. Other regulated companies, such as banks, will continue to have their own arrangements for outsourcing and will be responsible for operational risks associated with third-party suppliers of technology.
The designation is based on the trend of financial services moving to fewer cloud platforms, the UK Treasury said. If there is a disruption to one provider, it could impact more than one institution, raising the potential for broader disruptions in service.
Global Regulators Increase Oversight
The UK's stance is in line with trends in financial regulation around the world where regulators are reacting to increased reliance on cloud computing.
As part of the Digital Operational Resilience Act (DORA) (EU) 2022/2713, the EU added direct oversight of critical ICT (critical information and communications technology) providers for financial institutions, while in Australia and Singapore, the requirements on outsourcing and operational resilience for financial institutions have been tightened with regard to cloud services.
Amazon Web Services, Microsoft Azure, and Google Cloud are estimated to take up about two-thirds of the worldwide cloud infrastructure services market, highlighting the strong dominance of a few players in the industry.
Operational resilience, cyber risk and concentration of technology providers have been listed by the Bank of England's Financial Stability Report, and are significant risks to the financial system.
The cloud service has become a part of payment systems, lending, trading platforms and customer banking operations, the regulator said.
Source: Reuters
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Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
