What AWS Customers Need to Know About UK Proposals on Oversight of Finance Sector and Critical Third Parties

Following the 8 June 2022 HM Treasury’s policy statement on critical third parties, on 21 July 2022, the UK regulatory authorities, the Bank of England (BoE), Prudential Regulation Authority (PRA), and Financial Conduct Authority (FCA) published a joint discussion paper: Operational resilience: Critical third parties to the UK financial sector. The paper sets out detailed proposals for the oversight of critical third parties (CTPs), including cloud service providers (CSPs), with the oversight regime to be developed through powers granted in the Financial Services and Markets Bill (FMSB), currently under review by the UK Parliament.

AWS strongly believes that the dialogue between regulators, providers, and financial entities is important in order to deliver an oversight regime that enhances resiliency and security for our customers. AWS continues to support innovation in, and the overall stability of, the UK and international financial systems. We look forward to working with the BoE, PRA, and FCA to support a future framework that accelerates the digitalization and modernization of the financial sector.

Benefits of Cloud

AWS appreciates the BoE, PRA, and FCA highlighting the benefits of the cloud in their discussion paper, where they reiterate the following benefits:

• Well-managed outsourcing and other arrangements with third parties can bring benefits to firms and financial market infrastructures (FMIs) and, in some cases, to the supervisory authorities’ objectives. These benefits include efficiency gains, reduced costs, scalability, faster innovation, better customer outcomes, and improved operational resilience.
• CSPs’ ready-made solutions can reduce the time it takes for firms and FMIs to launch new products and services and enable businesses to learn and adjust their business models.
• Services offered by CSPs can also be more resilient than individual firms’ and FMIs’ own information and communications technology (ICT) infrastructure, which often comprises legacy systems that rely on less up-to-date technology. CSPs also offer cybersecurity expertise, data storage, and processing capabilities across a range of availability zones and geographic regions, enhancing the ability of firms and FMIs to withstand and quickly recover from disruption.
• Third-party ICT services helped enable a fast and smooth transition to remote working during the pandemic. They helped ensure firms and FMIs could continue delivering essential services to customers and supporting the wider economy.
• Scalability and other features of some services offered by CSPs can be more energy-efficient than individual firms’ own infrastructure. Reliance on these services could help lessen firms’ and FMIs’ environmental impact.

What’s Next?

We’re aligned with the UK authorities’ objective to deliver operational resiliency, while also supporting innovation and promoting the competitiveness of the UK financial services sector. We will continue to support our customers as they engage with the UK authorities to develop and implement relevant requirements.

AWS is committed to supporting international regulatory discussions to reinforce the benefits of establishing a harmonized and fair framework for the use of cloud services by the financial services sector globally.

AWS looks forward to contributing to the discussion paper, and welcome input and feedback from our financial services customers and partners. If you have any questions about the joint discussion paper, and your use of AWS, you can contact us using our Contact AWS resources. We have a team of regulatory and technology experts with a background in financial services ready to support you.