Cloud Computing for Banks by Jeff Picozzi

Conventional wisdom maintains that cloud computing for banks will never come to pass due to security and regulatory concerns. However, new research from Ovum and SAP shows that financial services firms are increasingly moving to the cloud - and that regulators do not disapprove of it, provided regulatory requirements are met. Many stakeholders, from old-line banks to chief compliance officers and regulators, may push back against cloud computing for banks. However, just as cloud-based capabilities have lowered entry barriers for disruptive newcomers in other industries, what will happen when a branchless and data center-less bank perfects the recipe for ultra-low-cost financial services in the cloud that passes regulations?

Cloud computing comes in a number of variations. Private clouds are built on the customer's premises or in a multitenant collocation facility. Public clouds are accessed over the Internet or via private connections, typically with multiple tenants sharing the same infrastructure, such as Microsoft, Google and Amazon. Hybrid clouds are combinations of installed or owned applications and one or more of the cloud models.

Why Cloud Computing?

According to Ovum, banks are turning to the cloud and software-as-a-service for the same reasons other businesses are: speed, flexibility and lower costs. Of course, banks remain concerned about regulatory requirements around security, privacy and data domicile. When it comes to security and privacy, cloud-based facilities - both private clouds in collocation centers and even public clouds - arguably have a better record for security and privacy over the past few years than some of the leading banks using owned-and-operated data centers. As to the question of data domicile - i.e., where regulations prohibit the residency or transfer of data out of their countries - cloud providers can manage cloud instances and data transfers to enforce these rules.

There is plenty of regulatory scrutiny for public clouds that banks using private clouds do not face. For example, there are plenty of challenges for Singapore banks, according to a report developed by Citihub in Hong Kong. The Singapore Monetary Authority's scrutiny will include the examination of concentration risk, where multiple banks share the same infrastructure and are subject to common risk.

The same theme emerges in the Federal Financial Institutions Examination Council's bank examination rules in the United States, where the examination will focus on the amount of risk present when resources are shared within a single organization or across various clients of the service provider. Resources can be shared at the network, host or application level.

Regardless of the type of cloud facility used by banks, a complete, auditable program is required to sufficiently review the vendor's operations, security and compliance programs. There are plenty of vendors available on the market today who are well-versed in financial services compliance and can assist banking clients in accessing their needs to provide the benefits of cloud computing for banks. In fact, we recently announced a partnership with Google Cloud Storage Nearline, to design an on-ramp to the cloud via an offline ingestion service that builds on security, logistics and data management capabilities.

LINK:	http://blogs.ironmountain.com/2015/industry/financial-services/cloud-c...
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