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1 [1] (December 3, 2021)

handle is hein.crs/goveexq0001 and id is 1 raw text is: $ Congressional Research Service ~ Informing the legislative debate since 1914 December 3, 2021 Bank Use of Cloud Technology The banking industry has been a prominent, if sometimes skeptical, adopter of cloud technology. Proponents promise scalability, flexibility, and cost savings, among other benefits. However, the technology also introduces potential operational risks and policy concerns, such as systemic risk. Banking's steady, but not advanced, adoption of this technology (as shown by its position along the adoption curve in Figure 1 below) reflects this trade-off. What Is the Cloud? Put simply, cloud users pay cloud service providers (CSPs) to use CSPs' computing resources (e.g., servers and mainframes), rather than purchasing and maintaining their own. According to the National Institute of Standards and Technology, cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources. By the same definition, the five hallmark characteristics of the cloud are (1) on demand service; (2) broad network access; (3) resource pooling; (4) rapid elasticity; and (5) measured service, or the ability to monitor or limit quantities used. Transferring the maintenance of computing resources to a CSP allows banks to avoid certain administrative tasks (such as patching and backups) and investment costs. Cloud services also allow a company to quickly grow and then shrink with demand, paying only for what it used. There are four ways banks and other companies may deploy cloud technology, often called cloud deployment models: (1) Private cloud: resources are dedicated to and for sole use of one company. These services can be hosted Figure 1. The State of Cloud Adoption C In. 0l QU on premises or off-site, and may be managed by the company or a third-party provider. (2) Public cloud: companies share resources in the same data center and possibly the same physical server at the site of the cloud service provider or a third-party facility. (3) Hybrid cloud: a model that employs both private and public cloud solutions. (4) Community cloud: entities with a similar purpose share cloud infrastructure. Banks and the Cloud One survey revealed that, prior to the COVID-19 pandemic, nearly 91% of banks and other financial institutions were using the cloud or considering using it in the near future. Since the pandemic, media reports suggest cloud adoption has increased as banks sought to cut costs, meet public demand for online services, and manage teams of remote workers. Still, while bank adoption of any cloud service is relatively high, the overall percentage of bank workloads in the cloud is comparatively low. One consulting firm that works extensively with banks and other financial institutions has estimated that between 8% and 10% of global bank business is conducted in a cloud environment. Generally, banks are more likely to migrate to the cloud functions that focus on internal bank business, including finance, legal and regulatory compliance, and human resources (sometimes referred to as enterprise applications). On the other end of the spectrum, core banking services are likely to be among the last to convert. Core banking services refer to the systems that facilitate vital bank business, including processing transactions, updating accounts, and reconciling ledgers. me Production Use Cornmod tizati on Source: Accenture. Notes: Strategic: adoption of cloud is intended to confer a competitive advantage. Mainstream: adoption is common among businesses in the industry. Experimental: not in full production; business success does not hinge on cloud use. https://crsreport. E Corerce Capital Electronics CRetail Markets Hig[ Tech S corr orucains oftware Pharma Lfe Scences redia & Instirance Banking Entertaniment Aerospace & Defence A r Heal hcare Payers Federal Gojernment Agencies Consume- Goods Education Healthcare Prov iders /Ghemicasa Travel Kwy Industrialtrg Eeg 2Po r iiy S,. a -gi M Ite _ F penmen'aI 13[___________Sae & Loa overnmITent Tn to U tltes eth - a Emerging Early Adoption

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