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FCA issues welcome guidance on Cloud
Financial regulator provides guidance on application of rules when outsourcing to the cloud.
The FCA recently issued guidance on the application of its rules when outsourcing to the cloud. Its updated approach was put into the context of the FCA's mandate to support competition and the range of policy initiatives implemented by the regulator to support that obligation.
techUK has highlighted the central role for cloud-based technologies to help address the challenges posed by legacy infrastructure in established financial services firms (Taking the Initiative: Leading with Technology in Financial Services) and in helping drive innovation across the sector. A key focus of that work has been to flag where issues of regulatory uncertainty and concerns around security impede the take up of cloud services. techUK views cloud services as tried and tested and as more secure than the complex legacy systems they replace. Without the full approval of the regulator, however, adoption will be hindered. The FCA's guidance, therefore, is a welcome step in the right direction.
The regulator notes that 'cloud' is a broad term and is defined and interpreted differently. To clarify, the FCA views the cloud as 'encompassing a range of IT services provided in various formats over the internet. This includes, for example, private, public or hybrid cloud, as well as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS)'. The FCA also acknowledges that the boundaries of that definition may well change over time as the technology is continually evolving. The FCA's aim to not inhibit ongoing innovation and the take up of technology, coupled with a need identify potential risks is both welcome and reasonable.
The regulator also notes that the development of some policies and regulatory initiatives which will impact on firms' decision making with regards to cloud based technologies lie outside of their direct control, such as the EU Digital Single Market strategy and reform of EU Data Protection legislation. The FCA is, of course, engaged in these polices, as is techUK, but firms need to be aware of the evolving landscape.
The FCA will be consulting on this guidance for three months. All input and comments should be emailed to itoutsourcing@fca.org.uk by 12 February 2016. Final guidance will be published shortly thereafter.
Lisa Moyle, Head of Financial Services & Payments at techUK noted that "The FCA's work in this area is important and any steps to reduce regulatory uncertainly around the use of cloud-based technologies in financial services is very welcome. We urge members to share their thoughts with the FCA'"
