Cloud computing in the banking system – jeopardizing financial data?
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עברית (Hebrew)
Israel’s wealthiest bodies, the banks and the credit companies, will save a fortune and grow fatter, but what about the security of Israelis’ financial data? Who would be able to tell how much money there is in each account and what is each customer’s credit situation?
On September 10, The Bank of Israel issued a “draft ahead of discussion” to Israel’s banking and credit institutions, entitled “cloud computing environment risk management“, complete with comprehensive guidelines as to the modes of the authorized use of cloud computing services. The draft guidelines published by the Bank of Israel’s Banking Supervision Department includes a caveat calling for reactions and appeals up until September 21 – after which the proposal becomes binding, and the entire Israeli banking system would have to adhere to it.
The paper begins with a general description of cloud computing, complete with all its advantages and disadvantages, as well as general guidelines, authorizations and prohibitions for using cloud computing, such as the prohibition on using cloud services for core activities, holding comprehensive tests ahead of compliance with European banking standards, banking data encryption, on-site technological monitoring means, control authorizations and allowances, as well as assuming corporate responsibility for each bank’s cloud technology.
The paper, published by the Banking Supervisor, is strictly general. It does not specify any method or technological standards, it does not provide any clear guidance as to the authorized data storage per the cloud services. Thus, the paper in fact vests the banks themselves with full responsibility for the safety of the banking data of all the clients of the banking and credit system. This is tantamount to letting the cat eat the canary.
The 
Technology Desk sets the record straight about cloud computing and gives you all the lowdown: what will the banks gain, as usual, and what do you stand to lose…
Cloud computing is a relatively new method (with early versions unfolding about 20 years ago) for consolidating the organization’s entire computing infrastructure and requirements (at any size, even if they come down to one single user) and outsourcing them to a supplier which provides computer infrastructure, hardware, software and data back-up.
Cloud computing providers are major companies whose physical locations house numerous powerful computer infrastructure comprising, inter alia:
- Powerful servers with high computation and survivability features
- Routers which channel the data flow to and from consumers to the providers over the internet
- Traffic management systems which coordinate data flow
- Security and information security components (e.g. firewalls, antivirus and so on)
- Monitoring, control and gauging devices
- Data backup devices featuring business continuity
Cloud service providers’ installations are often well-secured, complete with back-up energy supply and communications, in addition to being controlled and monitored.
The major advantage cloud services feature is the efficient use and application of various computing resources, which are allocated based on the requirements, demand or settings between various users.
Thus, for instance, one automatic file backup system, featured by one cloud provider, can cater to numerous organizations (dozens or even hundreds) which backup their data once hourly, once daily or once weekly – thereby saving each company having to acquire an expensive backup system which in fact works for very little time between sessions. Resource sharing means a significant reduction in the organization’s computing costs. This is known as SAAS: Software As a Service – a software you buy as a service, so you do not actually buy the software.
Another advantage, which many of the organization that switch to cloud computing adopt all too happily, is saving on manpower. The IT world is known for its highly expensive and well trained professional personnel.
Additional advantages of cloud computing include saving floor space, energy, software and hardware acquisitions as well as avoiding the dependence on computer units, which is often an organization pitfall.
Aside from the advantages, one must also bear in mind this method’s numerous shortcomings and risks, such as potential exposure of sensitive data located outside the organization, which might be gleaned by outsiders; dependence on the internet and on the specially-dedicated communication lines to the provider, as well as the latter’s strength and resilience, both financially and technologically.
The cloud services industry has many players. Amazon is among the industry leaders. One of the pioneers in this field, Amazon has been authorized to provide cloud computing to the US Army through AWS, Amazon Web Services. Another leading player is Sales Force, which mostly provides remote cloud-based CRM services to companies and organizations.
What are the advantages cloud computing offers the Israeli banking system? It takes but one look at the computer farms Israel’s major banks keep outside Tel Aviv, to realize the extent of the savings the banks could generate by switching to cloud services, even partially and gradually. This will make their already bulging purses even heftier.
A few questions remain unresolved, and they should at least be raised out loud: how many local hardware providers will lose money over this move? How many employees will be let go? What is the level of the security of Israelis’ financial data when stored in a cloud – or even out of the country, for that matter?
