Regulators complicate cloud adoption for Financial Institutions, study shows

By Puja Sharma

AFME & Protiviti report calls for a coordinated approach between supervisors to unlock the full opportunities of Cloud innovation

A new report published today by the Association for Financial Markets in Europe (AFME) and Protiviti outlines four key barriers holding back the pace of Cloud adoption within the Financial Services sector.

The report entitled “State of Cloud Adoption in Europe – Preparing the path for Cloud as a critical third-party solution” finds that while the Cloud can be an enabler for financial services innovation, some key barriers are currently making it harder for firms to adopt and fully leverage its potential.

Fiona Willis, Associate Director of Technology and Operations, at AFME, said, “The benefits of Cloud technology for the growth of the financial services sector are clear, allowing financial institutions to deliver agile, scalable, and resilient services to their clients. However, our report finds the rate of adoption of Cloud technology is currently being held back by overly complex and unharmonised regulation.”

“AFME members believe it is essential that policymakers, in the EU and globally, do not inadvertently impact the continued adoption of Cloud services. We, therefore, make key recommendations to help ensure regulators and policymakers can work together to unlock the full potential of cloud opportunities for the financial services sector.”

James Fox, the Director, of Enterprise Cloud at Protiviti, said, “Cloud technology is increasingly critical for financial institutions, creating a significant opportunity to increase productivity, flexibility, and resilience in support of their digital transformation initiatives.”

“Regulators are quite rightly taking steps to make sure that the application of Cloud technologies within financial services is properly regulated to avoid any potential risks or issues that could harm the global financial system. However, a careful balancing act needs to be struck between properly regulating Cloud technologies and not stifling innovation and competition within the financial services sector, and as our recent report shows, the current regulatory complexity is making it more difficult for financial institutions to adopt the Cloud.” Fox added.

Four key challenges :

• Concentration of Cloud Services

Globally, 65% of Cloud services are provided by just three entities, whose dominance is raising concerns among financial regulators, highlighting the risk of concentration in the Cloud marketplace.

• Regulatory Complexity

Regulatory fragmentation, uncertainty, and the time required for regulatory approvals are preventing financial institutions from innovating, slowing the pace of Cloud adoption. FIs are also subject to multiple different regulators that may ask for the same information in different formats and through different channels.

• Data Localisation

The forthcoming EUCS certification framework could have far-reaching negative implications if the proposals to achieve “immunity against third-country law” via EU control requirements are adopted.

• Management of Disruption in the Cloud

Several high-profile Cloud service outages have highlighted the need for greater visibility and confidence in Cloud providers’ abilities to predict, manage and communicate disruptions to their Cloud services. Regulators expect FIs to have primary responsibility for resisting threats to operational resilience, guarding against service disruptions, and recovering from incidents.