Colm Kelleher, president and CEO of UBS, warned that regulators should spend more time monitoring non-banks, or shadow banks.

During a panel discussion about the risks facing the financial sector at the World Economic Forum, he issued the stark warning. Davos.

He stated that regulators “have taken their eyes off of the ball” with regard to shadow banking.

The panel included some of the world’s most influential bankers: Jean Fraser, CEO of Citigroup, France’s François Villeroy de Gallau, Governor of the Central Bank of Singapore, and Tarman Shanmugaratnam, Chief Minister of Singapore.

The committee was optimistic about traditional banks’ position, but less positive about shadow banks’ regulatory status.

“The biggest challenge today is the non-banks,” Villeroy de Gallo told the committee, and that in shadow banking, the world’s regulators are “being left behind.”

“We must rush to some urgent non-bank regulation,” he added, using the so-called “cash rush” in 2020, exploding LDI and cryptocurrencies.

What are shadow banks?

Shadow banks are financial institutions which provide similar services as banks but without the same regulatory oversight. These include currency exchanges, venture capital fund, and hedge funds.

It is increasingly becoming an area of ​​concern among regulators with risks of migration from the more traditionally regulated financial sector.

Participants agreed that non-bank regulation needs to be improved, but they also agreed that regulation by traditional banks had made it significantly more stable than before 2008.

Kelleher stated that banks are “systemically secure”, while Villeroy de Gallo said that policymakers “haven’t over-regulated” since 2008, despite industry complaints. He added, “We were correct.”

Villeroy de Galhau however suggested it. Edinburgh Reforms– The UK government’s broad-ranging financial services reforms could increase the stakes. Andrew Bailey was mentioned by him, and he added that he agreed with him.

Villeroy de Galhau was also worried about reforms that would increase the differences between the United Kingdom (UK) and the European Union. Kelleher stated that “global markets do not have a zero-sum game” as well as that “global economies are not a zero-sum proposition” and that, starting with Brexit, “political discussion has outweighed practicality” within the UK.