Treasury Identifies Risks in Widespread Use of Cloud-based Financial Technology

Treasury reviewed the benefits and risks arising from the increased use of cloud services technology by financial sector firms.

In the "first-of-its-kind" report, Treasury said that cloud services could help financial institutions become more resilient and secure, but firms need to ensure that proper safeguards are in place. Treasury identified a number of challenges across the industry and found, generally: (i) an insufficient understanding of the risks involved with usage of cloud-based service providers, (ii) misuse of the technology (i.e., misconfiguring user settings causing an application error), (iii) exposure to operational risks specific to the cloud-based service provider, (iv) significant industry reliance on cloud-based service offerings, (v) lack of equal bargaining power between financial institutions and service providers and (vi) regulatory gaps in coordination among financial authorities and between jurisdictions.

Treasury encouraged regulators to conduct further evaluation to determine the financial risks associated with providers offering cloud services, including the unique risks posed by the availability of only a limited number of providers. Treasury also said that it will establish an interagency Cloud Services Steering Group that will (i) promote close cooperation among U.S. regulators, (ii) conduct tabletop exercises with industry participants and (iii) develop a best practice framework for cloud-service adoption.