Today’s need-to-know storiesUBS chair warns of systemic risks in insurance sector
UBS chair Colm Kelleher has warned that insurance companies pursuing favourable ratings for their private credit assets poses a “looming systemic risk” to global finance.
Speaking at the Hong Kong Monetary Authority’s Global Financial Leaders’ Investment Summit, Kelleher accused insurers, particularly in the US, of engaging in “ratings arbitrage” reminiscent of practices that contributed to the 2008 financial crisis, the Financial Times reported.
Kelleher criticised the rise of “small rating agencies ticking the box for compliance of investment” and said regulators were failing to rein in risk while encouraging growth.
“If you look at the insurance business there is a looming systemic risk coming through because of lack of effective regulation,” he said.
His remarks follow a Bank for International Settlements report warning that ratings on private credit assets held by US insurers may be inflated, raising concerns about potential market disruption during periods of stress.
Kelleher also struck a pessimistic note on his home country, claiming “Switzerland is losing its lustre” amid competition from Asia, the economic strain of US tariffs and tougher banking oversight.
European banks’ dollar exposure increasing, warns EBA
European banks have grown more reliant on US dollar funding, the European Banking Authority has warned.
Dollar-denominated funding accounted for 13.1 per cent of European banks’ total financing at the end of 2024, up from 12.4 per cent a year earlier, according to the EBA’s latest report.
Their total share of assets held in dollars also increased to 23 per cent from 19.3 per cent.
The regulator said banks’ subsidiaries were “increasing their reliance on US dollar funding at a faster pace compared to the parent entity”, creating “a rather meaningful currency mismatch” on balance sheets.
Fears in Europe over dollar funding have grown this year as President Donald Trump introduced new tariffs and increased pressure on the Federal Reserve.
The developments have led some European regulators to question whether they can continue to rely on the Fed for dollar liquidity during times of market stress, according to a recent Reuters report.
Bank of England must strengthen climate risk approach, says WWF
The Bank of England is being urged by the World Wide Fund for Nature to strengthen its approach to environmental risks in order to help control inflation and safeguard the UK’s long-term financial stability.
In a new report, the charity called on the central bank to develop stronger technical expertise in assessing climate and nature-related risks and warned that it is falling behind its global peers.
The report said the BoE should play a more active role in supporting the shift to a net zero and nature-positive economy.
“There is so much more they could and should be doing. The financial sector has a huge impact on climate change, which is leading to growing economic pressures in the UK, like food price rises and making properties uninsurable due to increasing flood risk,” said Karen Ellis, chief economist at WWF.
“As one of the most powerful bodies tasked with regulating this sector, the Bank of England’s actions matter for climate and nature, and frankly the Bank of England and their well-resourced team must do more.”
Ex-Goldman banker on trial in Switzerland over 1MDB scandal links
A former Goldman Sachs and Rothschild banker has gone on trial in Switzerland as he seeks to overturn a fine for allegedly failing to report suspicious transactions linked to Jho Low, the fugitive financier accused of masterminding the 1MDB scandal, which involved the misappropriation of billions of dollars from Malaysia’s sovereign wealth fund.
The banker, identified only as L, appeared before the Swiss Federal Criminal Court in Bellinzona on Tuesday.
He was fined SFr150,000 ($185,000) in 2022 after the Swiss Finance Department found he breached reporting obligations during his time at Rothschild Bank.
His lawyer, Andrea Taormina, said his client “did nothing wrong” and argued that responsibility for filing suspicious activity reports lay elsewhere.
Swiss authorities allege that L helped Low open accounts and maintain fraudulent business ties despite concerns about the source of his wealth.