Cloud services provided to banks by technology giants such as Amazon and Microsoft are being scrutinized by the international Financial Stability Board, US Federal Reserve governor Lael Brainard said. Basel-based FSB is concerned about the concentration of these providers and is looking at banks’ ability to “fail over” automatically to a second system if the main one collapses, she told lawmakers this week.
“There is technology out there or developing that would provide mechanisms to do so, so that lock-in is less of a risk,” Brainard told the House Financial Services Committee. “This is certainly something we’re very focused on.” The FSB recognizes that banks that use cloud services for data storage, computational capacity and redundancy may mitigate some risks while creating others, she said.
Referring to banks, Brainard said: “We need to hold our institutions accountable for making that risk assessment in a very well-informed way and taking that migration seriously.” Last February, an FSB report said that the concentration of cloud computing services could pose systemic risks if the systems link together many systemically important firms or markets.