Bank of England warns of potential risks from cloud data providers

(Reuters) — The Bank of England might strengthen its controls on cloud data providers and other technology firms to counter possible risks to the stability of the financial system from the rise of fintech, Deputy Governor Dave Ramsden said.

The Bank of England (BoE) has expressed concerns before about the reliance by financial firms, especially fintech startups, on third-party technology companies for key parts of their operations, and Ramsden said this scrutiny would intensify.

“We plan to analyse further whether we need even stronger tools to manage the risk that critical third parties, including potentially cloud and other major tech providers, may pose to the Bank’s … objectives,” Ramsden told the Innovate Finance conference on Wednesday.

Regulators globally have been tightening scrutiny of outsourced functions as they worry that core services financial firms provide to customers are vulnerable to outages at third parties.

Britain’s government is keen to promote fintech as an area of growth and hopes that nimbler regulation will enable it to steal a march over the European Union, where British financial firms now have reduced access due to Brexit.

The BoE has said it will not water down regulatory standards, but does see scope for more streamlined regulation of smaller banks and in some areas of insurance.

On Monday, finance minister Rishi Sunak asked the BoE to work with the finance ministry on whether the central bank should set up a digital version of sterling to compete with cryptocurrencies, which he dubbed ‘Britcoin’.

The government is also consulting over proposals to relax stock market listing rules due to a concern that Britain is less attractive than the United States as a listing venue, especially for tech companies whose founders want to keep an sizeable role.

Ramsden said the BoE had taken a step to make life easier for smaller financial companies on Monday by giving firms more direct ways to access its high-value payments system, which is dominated by major banks and processing companies.

Other steps included work standardising the identification of businesses involved in financial transactions, and looking at whether artificial intelligence could ease the burden of regulatory compliance.

Source: https://venturebeat.com/2021/04/22/bank-of-england-warns-of-potential-risks-from-cloud-data-providers/