The U.S. Department of the Treasury released a report this week that looks at the benefits and challenges associated with financial sector firms adopting cloud services technology.
While cloud services can increase access and reliability for local communities and empower community banks to compete with financial technology firms, the report found that financial service firms, in the process of ramping up these services, need more visibility, staff support, and cybersecurity incident response engagement from Cloud Service Providers (CSPs).
In addition, the report recommends further evaluation from the Treasury and financial regulators to determine the financial risks associated with a limited number of providers offering cloud services.
“There is no question that providing consumers with secure and reliable financial services means greater demand for cloud-based technologies,” Deputy Secretary of the Treasury Wally Adeyemo said. “Treasury is committed to working with financial regulators, industry partners, and cloud service providers to drive greater collaboration and transparency. 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.”
The report outlines six key challenges that could detract from the overall benefits. These include insufficient transparency to support due diligence and monitoring by financial institutions; gaps in human capital and tools to securely deploy cloud services; exposure to potential operational incidents, including those originating at a CSP; the potential impact of market concentration in cloud service offerings on the financial sector’s resilience; dynamics in contract negotiations given market concentration; and international landscape and regulatory fragmentation.
Treasury will launch an interagency Cloud Services Steering Group within the next year to address a number of the issues identified in the report through closer domestic cooperation among U.S. regulators on cloud services; additional tabletop exercises with the private sector; and development of best practices for cloud adoption frameworks and cloud contracts.
Further, the Treasury will continue working with U.S. financial regulators and other agency partners, as well as financial firms and CSPs, to execute recommendations that may help financial firms realize the benefits of cloud services.
The report was done with support from the Financial and Banking Information Infrastructure Committee (FBIIC) and input from U.S. regulators, private sector stakeholders, trade associations, and think tanks. The report does not impose any requirements, nor does it endorse or discourage the use of any specific provider or cloud services.