The Basel Committee of banking regulators has proposed that bank board directors take ultimate responsibility for managing the risks associated with outsourced services, including documenting how they handle outages and disruptions.
As banks increasingly rely on third-party tech companies like Microsoft, Amazon, and Google for cloud computing, regulators are concerned about the potential impact on the financial sector if a widely used provider experiences downtime.
Recent internet outages in Nigeria due to damaged undersea cables have highlighted the risks of third-party dependencies.
The Basel Committee, comprising regulators from the G20 and other countries, proposed 12 principles for banks and their regulators to ensure proper oversight of third-party arrangements.
These principles emphasize the need for banks’ boards to document key decisions related to third-party strategies and maintain comprehensive records.
The European Union’s Digital Operational Resilience Act (DORA) and similar initiatives in Britain aim to enhance resilience in the financial sector starting next year.