Israeli banking corporations are now allowed to use cloud computing in their core systems and core activities, according to an amendment to the Circular on Proper Conduct of Banking Business concerning cloud computing. Until recently, this ‘core systems’ use was expressly prohibited by the circular. This change in approach, as the Supervisor of Banks clarified, stems from the recognition that cloud computing services promote and enhance organizational computing capabilities as well as the organization’s efficiency.
The term "material cloud computing" – defined as cloud computing used by banking corporations in their core activities in their regular course of business – was added to the amended circular and a series of new related provisions were introduced. Among other things, the amended circular states that banking corporations must conduct a due diligence review of providers of material cloud computing services to ensure their compliance with applicable laws and regulations.
In addition, the amended circular specifies a list of contractual provisions that need to be included in agreements for material cloud computing services. These include the banking corporation's right to enable or disable (and block, if necessary) access to the computing services in times of emergency, and the service provider's obligation to participate in periodic cyber exercises conducted by the banking corporation. The circular also emphasizes that the agreements should also include details regarding the location of the cloud facility from which the service will be provided.
CLICK HERE to read the amended Proper Conduct of Banking Business Regulation 362 – Cloud Computing (in Hebrew).