The news: The UK Treasury proposed to regulate “critical” third-party tech providers in the UK financial sector, per Bloomberg.
What can regulators do? The proposal would let regulators designate certain third-party service providers, like cloud technology providers, as critical to the UK financial system.
That designation would give regulators the authority to:
The risk: Many financial service providers digitize their infrastructure by partnering with third-party tech companies that specialize in things like cloud computing and APIs. But those partnerships are increasingly concentrated among a handful of firms like Amazon and Microsoft.
With that level of concentration, an emergency or outage at one of these companies could have consequences that ripple across the entire financial services sector. The proposal is designed to mitigate or prevent such a mass disruption, which would undermine consumer trust in the UK financial sector.
Why is this important? Ensuring financial technology is sound, resilient, and diverse is vital as risks heighten globally.
The new UK proposal will hold these third-party tech firms accountable and should give some peace of mind to financial institutions and their customers.