Regulators Lead Cloud-Computing Vanguard
The FCA and FINRA are leading by example.
Often financial and data-privacy regulations have been arguments firms use to justify not adopting cloud computing.
However, industry analysis firm Celent noted in a recent research note that regulators are leading the charge in using cloud computing.
“The regulators have been learning a lot from their own experience with the cloud and what it can do,” Brad Bailey, research director, capital markets at Celent, told Markets Media.
National regulators, such as Financial Conduct Authority in the UK and Financial Industry Regulatory Authority in the US, have embraced cloud computing to optimize their internal technology infrastructures.
“This gives the signal to the industry that it is an environment that is no longer considered high risk and (is) a safe environment to move to,” added Ben Pott, head of government affairs at NEX, which partnered with Celent on the report.
Pott also noted that cloud computing already has gained traction in the capital market in recent years.
“There was a time when we saw cloud technology predominately taken up in the fintech and regtech space where startups would build natively on the cloud, but we increasingly see a broader take-up of established financial firms moving to a cloud environment,” he said.
Although regulators have reassessed the risk and benefits of cloud computing, they have not changed the responsibilities that firms have for cybersecurity.
It is hard to ignore that there is an extremely concentrated market of large cloud providers, said Pott.
“The quid pro quo of having a smaller number of cloud providers is that they have a lot more spending power,” he added. “Certainly from a cybersecurity perspective, the cloud providers have cybersecurity defenses that are almost unmatched anywhere else in the financial industry.“
Bailey expects that regulators will work with the industry to define minimum standards for financial firms so the firms can oversee their outsourced relationships effectively.
“Within cloud computing, there are quite a few models for people to come up with paths to secure and private instances in the cloud,” he said.
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