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Financial Services Law Insights and Observations

Democratic members ask FSOC to deem cloud providers as "systemically important"

Privacy/Cyber Risk & Data Security Data Breach Credit Cards FSOC Congress

Privacy, Cyber Risk & Data Security

On August 22, two members of the U.S. House of Representatives, Katie Porter (D-Calif.) and Nydia Velázquez (D-N.Y.), sent a letter to the U.S. Department of Treasury requesting that the Financial Stability Oversight Council (FSOC) consider designating the three leading providers of cloud-based storage systems for the financial industry as systemically important financial market utilities. The letter is in response to the recent data breach announcement by a national bank (covered by InfoBytes here), where an alleged former employee of the bank’s cloud-based storage system gained unauthorized access to the personal information of credit card customers and people who had applied for credit card products. According to the Congresswomen, 57 percent of the cloud services market is “cornered by” three main providers, and “a lack of substitutability for the services provided by these very few firms creates systemic risk.” The letter argues that cloud services are not currently subject to an enforced regulatory regime and, “[w]ithout a dedicated regulatory regime proportional and tailored to their very unique structure and risks, cloud comparing companies will continue to evade supervision.”

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