Three cloud giants hold 79% of UK bank supplier ties, Bank of England finds

Three cloud computing providers account for 79 per cent of reported supplier relationships across UK financial services firms, a joint Bank of England and Financial Conduct Authority survey has found, putting the City's AI ambitions in the hands of a small group of foreign technology companies.

The concentration carries operational risk. More than a third of cloud relationships were judged critical to operations and difficult to replace, yet only 35 per cent of those had tested plans to switch providers in the event of disruption. Third-party providers also account for 53 per cent of systems firms consider highly material to their operations. The findings follow a Google Cloud outage that illustrated what disruption to shared infrastructure can mean for banks and other businesses, and come as the Treasury Committee presses regulators on their oversight of major cloud providers, warning an outage could threaten financial stability.

Understanding of the AI systems themselves is thin. Just 24 per cent of respondents said they had deep knowledge of their most important third-party AI systems, while 81 per cent relied instead on supplier assurances and contractual protections. "Nearly all firms have an AI policy in place, however very few have a clear understanding of the third-party AI systems they are using," said Sebastien Marchon, chief executive of fintech firm Rydoo. "That needs to change if firms want to fully leverage the benefits and ensure they can answer to regulators." Marchon pointed to newer integration technologies, including Model Context Protocols, as a way to connect AI tools to existing software, but said oversight of external providers must improve.

Ambition is not in short supply. A separate KPMG survey found 87 per cent of UK financial services leaders believe AI will have a greater impact on the industry than the 1986 Big Bang reforms that reshaped London's markets. The Bank's research suggests delivery is harder: almost a quarter of firms cited difficulty integrating AI into existing processes as a major barrier, and 22 per cent pointed to outdated systems and infrastructure.

The FCA warned last week that some firms were deploying AI without adequate governance or human oversight, urging them to keep senior managers accountable for the technology.