The Bank of England is warning that additional policy measures may be required to mitigate financial stability risks from the growing concentration of power in the hands of global cloud providers.
In its bi-annual Financial Stability Report, the central bank singled out the 'secretive' practices and opaque nature of major cloud providers such as Google, Amazon and Microsoft
Without naming the names, the report states: "Although the PRA and FCA have recently strengthened the regulation of firms’ operational resilience and third party risk management, the increasing reliance on a small number of CSPs and other critical third parties could increase financial stability risks without greater direct regulatory oversight of the resilience of the services they provide."
With more banks moving criticial infrastrcuture to the Cloud, the Bank fears that Big Tech providers could have undue sway over the future stability of the financial system.
In a press conference, BofE governor Andrew Bailey said: "That concentrated power on terms can manifest itself in the form of secrecy, opacity, not providing customers with the sort of information they need to monitor the risk in the service. We have seen some of that going on."
Of particular concern is the security of cloud systems, says Bailey. "As regulators, as people interested in financial stability, we have to get more assurance that they are meeting the levels of resilience that we need."
The Bank's Financial Policy Committee welcomed the engagement of the Financial Conduct Authority and the Treasury on how to tackle these risks, but emphasised that a more coherent regulatory framework with buy-in from overseas supervisors would be required.
"The FPC recognises that absent a cross-sectoral regulatory framework, and cross-border co-operation where appropriate, there are limits to the extent to which financial regulators alone can mitigate these risks effectively."