UBS Chairman Colm Kelleher: “I Think Regulators Lost Control”
UBS chair Colm Kelleher commented about the state of the regulatory environment, specifically how previous excess has now led to a loss of control.
Colm Kelleher, chairman of UBS, spoke about global regulations during a panel at the “2025 Global Financial Leaders’ Investment Summit” in Hong Kong, citing two “major disconnects”. Firstly, there is a lack of effective regulation in the shadow banking system. Secondly, there is a disparity in the speed of regulatory simplification.
“I think regulators lost control. Because in their desire to overregulate the banking system, they have lost control,” Kelleher said at the event hosted by the Hong Kong Monetary Authority. “They chased a huge amount of product out of the banking system into the shadow banking sector, which is not regulated on the same basis.”
Easing Versus Tightening
On disparity, Kelleher noted that the US, in contrast with Switzerland, was leading the way in deregulation.
“Quite rightly, I think, because the US has decided that capital is yesterday’s problem. And what you need to do is – having settled the issue of capital for banks – you need to have effective regulation to let economies grow. And Switzerland is going the other way,” he commented.
UBS is currently facing the prospects of tighter constraints back home as the Swiss government has proposed rules that would require it to hold $24 billion of additional capital aimed at making the country’s banks safer.
Risk of Arbitrage
The disparity Kelleher referred to was not limited to differences between countries but also within them.
“Let’s take the insurance business, right? Increasingly in insurance business, particularly in the [US], it’s regulated on a state-by-state basis, not a national basis. We’re beginning to see huge rating agency arbitrage in the insurance business,” he explained.
“Remember in 2007, subprime was all about rating agency arbitrage.”
Switzerland’s “Identity Crisis”
And specifically on Switzerland’s competitiveness, Kelleher said the nation has lost some of the attractiveness it once had as a prominent player in the global economy, naming three key challenges.
First, it is facing a threat in global wealth management from centers like Hong Kong and Singapore. Second, its pharmaceutical industry is being hollowed out as a result of tariff talks. Third, it is having “a bit of an identity crisis” about its role in global banking.
“So I think Switzerland is losing some of that luster as other centers are now competing with it for capital,” he added.
