ECB issues cloud outsourcing guide for banks amid rising cyber risks
FRANKFURT, GERMANY — The European Central Bank (ECB) has finalized its guide on outsourcing cloud services, clarifying expectations for banks to manage risks tied to third-party providers.
Although the Guide is not legally binding, it is an attempt to standardize supervision to ensure that the Digital Operational Resilience Act (DORA) is followed, given the increasingly high cybersecurity threats.
ECB’s cloud outsourcing guide focuses on risk management
In contrast to binding rules, the document outlines supervisory expectations and industry best practices, with IT security and cyber risk mitigation being the absolute priority in the current geopolitical situation.
As mentioned by Anneli Tuominen, a member of the Supervisory Board of the ECB, dependence on a relatively small number of third-party providers creates high vulnerabilities in the banking sector, which further requires uniform risk management methods.
“Banks are relying on outsourcing cloud services to a handful of third-party service providers. This exposes them to several risks, including IT security and cyber risks, which remain an ECB priority in times of heightened geopolitical tensions,” Tuominen said.
The Guide refines proportionality principles, ensuring banks of varying sizes and risk profiles can adapt measures appropriately.
It also distinguishes between DORA’s legal requirements and the ECB’s recommended practices, addressing feedback from 26 respondents during its 2024 public consultation. The ECB establishes a level playing field among supervised institutions, encouraging consistency while remaining flexible in its implementation.
Balancing innovation and security in cloud adoption
Banks utilize cloud services to enhance efficiency and scalability. Hence, the ECB Guide prompted a level of strong control without suppressing technological advances.
The good practices observed in the document involve continuous monitoring, due diligence on vendors, and the development of contingency plans in response to operational shocks.
Specifically, it does not introduce new rules; rather, it utilizes existing terminology to align with the existing regulations, thereby minimizing compliance confusion.
The ECB’s risk-based approach takes into account the different bank profiles, which include not only the global giants but also the smaller regional players.
As the issue of cyber threats unfolds, the Guide presents an opportune guideline to harmonize the process of supervision as the banks retain resilience. Its publication is indicative of the ECB’s broader vision to ensure the protection of financial stability, given the increasing pace of digitalization within the financial sector.
