BoE warning over tech giants’ dominance as cloud providers

BoE warns overreliance on tech giants providing cloud services may pose a financial risk

The Bank of England (BoE) has issued a warning over the financial sectors reliance on cloud data providers, such as Amazon, Microsoft and Google.

In the central bank’s latest survey of the financial system, it warned that UK banks are transitioning more and more of their administration and accounts online into the cloud. The bank believes this move “could pose risks to financial stability”.

Prior to this warning, the BoE has already cautioned that Google, Amazon and Microsoft dominate the area, and the cloud online servers are highly concentrated.

Institutions have ‘accelerated’ their reliance on cloud services

The BoE’s Financial Stability Report outlined that since the start of 2020, financial institutions have “accelerated” their plans to increase reliance on cloud service providers (CSP).

The report added that this over reliance could “increase financial stability risks” and greater regulatory oversight is needed.

Sam Woods, the bank’s deputy governor, responsible for prudential regulation, said: “This is no longer something happening around the periphery of banks‘ systems – for instance with HR systems.

What is your sentiment on AMZN?

88.57
Bullish
or
Bearish
Vote to see community's results!

“What we now have moving into the cloud are things that are much more integral to the running of banks, which could go to safety and soundness.”

Microsoft and Amazon stocks drop

Microsoft stocks were down today by 0.22% and Amazon by 0.021%. Microsoft’s Azure and Amazon’s AWS were not called out directly by the bank, but they are the concerned companies involved.

Along with Google Cloud, another firm that is a big provider of cloud services, the three companies together control almost 60% of the global cloud computing market. Still, Google stocks were up today by 1.16%.

Amazon.com Inc
Daily change
88.33
Low: 87.48
High: 88.81

BoE governor weighs in

Andrew Bailey, governor of the BoE, explained in an online press conference for journalists that CSP are ”increasingly an integral” part of the financial services because “it is a model that works”. Nonetheless, as they are becoming more integral, the risks to the system increase and “it becomes more of a matter of focus”.

Bailey added: “As the market becomes more concentrated on a small number of suppliers, those suppliers can exercise market power, not only in price but also of the terms. That is where we do have a concern and do have to look carefully.”

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image