21ILLUSTRATION BY ANDREA CHRONOPOULOS. *BLOOMBERG SURVEY ASKING “WHO IS YOUR PRIMARY CLOUD PROVIDER?’’ SOME BANKS SAID THEY HAVE MULTIPLE PRIMARY PROVIDERSDATA: COMPILED BY BLOOMBERG
THE BOTTOM LINE European bankers are chafing at the need to
store sensitive client data on the cloud servers of U.S. tech giants,
but they appear to be a long way from having a credible alternative.unit of storage tend to decrease markedly with each
passing year. Europe’s institutions are already los-
ing the investment banking wars with Wall Street
and can’t afford to cede competitive advantages. But
some bankers say they worry about client data in the
hands of foreign companies. U.S. tech doesn’t enjoy
the reputation for trustworthiness that it did even
a few years ago, when European regulators were
among the first to challenge the industry’s standards
for privacy and competition.
Now, German and French government officials
are in talks with leaders in telecommunications,
technology, and finance to create a competitive
continental cloud service run by local tech compa-
nies. At the same time, banks including Germany’s
Commerzbank AG are trying to team up to present
joint cloud demands to U.S. providers in an effort
to increase the little leverage they have. “Europe
is looking at ensuring technological sovereignty
and reducing its dependence because it does fear
that somehow, all of a sudden, technologies that
we depend on could be switched off,” says Eline
Chivot, a Brussels-based analyst at the Center for
Data Innovation, a U.S. think tank.
The banks’ odds aren’t great. Previous attempts
to build European alternatives to U.S. tech have
foundered, and at this point the upfront costs
would be immense. Microsoft says it spends more
than $1 billion a year just on its global cloud net-
work’s security, while European banks are struggling
with declining revenue and profit. “In 2020, wak-
ing up and saying that we want to build a European
cloud, I’d say it may be too late,” says Bernard
Gavgani, chief information officer at French bank-
ing group BNP Paribas SA.
Big Tech is also savvier about lobbying regulators
than it used to be, working actively to charm mar-
ket watchdogs it ignored five years ago, say three
regulators who spoke on condition of anonymity
because they weren’t authorized to discuss the mat-
ter. Patrice Amann, a leader of the Microsoft cloud
team catering to financial-services companies in
Europe, the Middle East, and Africa, says increased
outreach efforts represent an interest in a construc-
tive dialogue. “It’s really to understand what is the
concern, how this concern is progressing, and what
we need to do as a company to comply completely
with the rules,” Amann says.
There’s no legal requirement for banks to keep
data in the European Union, but the bloc’s regu-
lators have nudged them in that direction. Several
cloud companies offer lenders the use of servers
based in Europe or their home country specifically.
“They need to evaluate the risk of having data in
a location that applies different security and dataprotection standards,” says Slavka Eley, head of
banking markets, innovation, and products at the
European Banking Authority. “If the risk is too high,
they shouldn’t agree to such locations.”
DNB ASA picked Amazon and Microsoft largely
because the Norwegian country’s watchdog
approved of the company’s audit policies for cloud
network security and because “they have a num-
ber of data centers in Europe and the Nordics,” says
Alf Otterstad, the bank’s head of technology and
services. Still, under President Trump’s Cloud Act,
U.S. storage providers can be ordered to provide U.S.
authorities information held on their servers no mat-
ter where that data are physically located.
The U.S. companies say they’ll defend client pri-
vacy. Andreas Wodtke, a vice president for finan-
cial services at IBM Corp. who sells cloud services
to banks in Austria, Germany, and Switzerland, says
the U.S. company will resist demands for data from
state agencies unless they’re made through interna-
tionally recognized channels such as mutual legal
assistance treaties.By the end of 2020, the European coalition work-
ing to develop a viable local cloud network hopes
to complete its first proof-of-concept testing. For
now, though, the Continent’s banks remain unam-
biguously dependent on Seattle and Silicon Valley.
“You hurt Germans with car tariffs or the French by
taxing red wine,” says Heiko Gewald, a professor of
information management at the Neu-Ulm University
of Applied Sciences in southern Germany. “But if
you want to hit Europe as a whole, then cloud is
the way to go.” �Nicholas Comfort, Steven Arons,
and Justina Lee▼ Number of European
banks that identify
one of the following
companies as a primary
cloud provider*
MicrosoftAmazonGoogleIBMSalesforceNetApp15107621◼ TECHNOLOGY Bloomberg Businessweek March 9, 2020