FRM Part II · FRM Exam Part II · Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector
A regional bank migrates its core payment processing to a single cloud provider to cut costs. Which feature of this change most directly raises systemic (financial stability) risk rather than only firm-level risk?
Concentration of many institutions' critical services in one cloud provider is the key systemic driver, because a single outage or cyber incident can disrupt numerous firms simultaneously. Cost savings, faster releases and staffing changes affect the individual bank, not the correlation of failures across the sector.
- ALower unit processing costs for the bank
- BConcentration of many financial institutions' critical services in the same provider, creating a common point of failureCorrect
- CFaster deployment of new software releases
- DReduced need for in-house IT staff
Explanation
Systemic risk arises when many institutions depend on the same provider, so one outage can disrupt many firms at once. Cost savings, faster releases and lower staffing are firm-level effects and do not by themselves create correlated failures across the system.
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