The finance ministry announced on Wednesday that the UK’s financial watchdog will have the authority to conduct onsite inspections of cloud computing firms such as Amazon, Google, and Microsoft that provide “critical” services to financial institutions.
To save money, banks have outsourced some functions to a few cloud computing companies.
According to the government, over 65 percent of UK businesses would use the same four cloud providers in 2020, prompting fears about significant disruption if one of the cloud providers is hacked.
Last year, the Bank of England (BoE) stated that provider contract terms can be hidden and opaque and that regulations are needed to ensure that they are durable.
According to the ministry, it plans to designate which outsourced services are “essential” and hence subject to direct oversight by the Bank of England and the Financial Conduct Authority.
Secondary legislation would support the designation, allowing regulators to establish regulations for the provision of services, conduct onsite inspections, and initiate an enforcement action.
“This will allow authorities to verify that important third-party services provided to financial businesses are robust, lowering the risk of systemic disruption,” the finance ministry said in a statement.
Last month, the European Union struck a provisional agreement on the Digital Operational Resilience Act or DORA, a set of standards for third-party service providers.
