Regulation, Multicloud and Finance: An Emerging Triangle
Financial services have long faced regulatory measures, even more so since the financial crisis of 2008. Basel III, an international framework developed in response to that era, brings updates to regulatory guidelines that are projected to prompt “dramatic changes to the current US risk-based capital framework,” according to an EY article. Regional and small banks may face even more pressure, Deloitte notes.
This increased regulatory scrutiny means increased infrastructure scrutiny. Financial services must demonstrate that their approach to the cloud includes data protection, customer privacy, operational resilience, maintenance of transactional integrity and reporting.
A 2023 EY report indicates that most jurisdictions do not yet have cloud-specific regulatory requirements. That’s changing rapidly, however, and the same report states that the regulatory landscape is increasing in complexity.
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For example, FINRA, the Financial Industry Regulatory Authority, has weighed in on brokerages’ agility in the cloud space. “Firms may wish to consider whether multicloud or hybrid cloud options are compatible with their business needs,” FINRA notes in a recent report. “Alternatively, they may wish to consider adoption of an exit strategy to mitigate against an unfavorable lock-in scenario.”
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Forbes notes that regulators are taking a closer look at the risks of cloud use, including the financial industry’s tendency to use third-party service providers, forcing user experience leaders to carefully balance regulatory needs against the advantages of additional cloud partnerships. But those same third-party providers also reveal why a multicloud approach can support financial services in this regulatory environment.