FCA gives all-clear for cloud computing in UK financial sector

FCA gives all-clear for cloud computing in UK financial sector

The UK's Financial Conduct Authority (FCA) has given its approval to the use of cloud computing in the financial industry.

In its proposed new guidance on cloud and other IT outsourcing services, the FCA insisted there is "no fundamental reason why cloud services (including public cloud services) cannot be implemented, with appropriate consideration, in a manner that complies with our rules".

In fact, the organisation even claims cloud outsourcing can even improve competition in the financial services sector as it makes it easier for companies to either enter the market or indeed expand within it.

The use of cloud computing is likely to still be viewed with caution by many financial firms, with security still seen as a big drawback, although the seal of approval from the FCA may help to ease those concerns.

Another consideration is the fact that outsourcing cloud services can create a number of legal complexities, especially in cases when data is outsourced to companies in other countries.

As a result, the FCA recommends that companies in the financial services industry establish whether their cloud contacts fall under UK law and are subject to UK court jurisdiction.

If not, it claims companies, along with their auditor and the FCA itself, should have "effective access" to its data as well as the cloud provider's "business premises".

The FCA added: "A firm should: ensure that notification requirements on accessing data, as agreed with the service provider are reasonable and not overly restrictive; ensure there are no restrictions on the number of requests the firm, its auditor or the regulator can make to access or receive data; advise the service provider that the regulator will not enter into a non-disclosure agreement with the service provider but will treat any information disclosed in accordance with the confidentiality obligation set out in the Financial Services and Markets Act (FSMA)…; ensure that, where a firm cannot disclose data for any reason, the contract enables the regulator or the firm’s auditor to contact the service provider directly."