Banks face many risks in moving more operations to the cloud, according to the U.S. Department of the Treasury.
In a Feb. 8 report, the government cited “insufficient transparency” from cloud service providers on outages and other incidents; and a shortage of IT staff — especially for mid-sized and small banks — to securely deploy cloud services in tandem with outside providers.
The cloud services market is heavily concentrated among a few large providers. According to Synergy Research Group, Microsoft Azure, Amazon Web Services and Google Cloud Platform held 76 percent of the U.S. cloud market during a three-month stretch of last year. According to the government, the lack of competition has led to banks having less bargaining power during contract negotiations.
“Many financial institutions have expressed concern that a cyber vulnerability or incident at one may have a cascading impact across the broader financial sector,” the report said. “While cloud service providers may have potential benefits for resilience and security, financial institutions are still exposed to risks associated with technical vulnerabilities at CSPs and face practical challenges to mitigating such risks or migrating their operations to another provider.”
More than 90 percent of banks maintain data, applications or operations in the cloud, according to a 2021 American Bankers Association survey. Four in five banks either plan to or have already migrated their core business functions to the cloud, according to an April 2022 report from professional services company Accenture.
The Treasury plans to convene a Cloud Services Steering Committee in the next year to develop best practices for cloud adoption frameworks and cloud contracts. The committee will include officials from the Treasury, Consumer Financial Protection Bureau and Office of the Comptroller of the Currency, according to The Wall Street Journal.
“Treasury is committed to working with financial regulators, industry partners and cloud service providers to drive greater collaboration and transparency,” said Deputy Secretary of the Treasury Wally Adeyemo. “By building trust, cooperation and collaboration at the outset, we can promote safe and effective migration for financial institutions that choose to adopt cloud services.”