Former hardline bank regulator: 'Everyone needs a time out'

Banks and their regulators need a break.

So says Philip Hildebrand, who was once one of the world's most powerful regulators during his time as governor of Switzerland's central bank after the 2008 financial crisis.

"Regulators need a timeout. There's a worry the post-crisis regulation has gone too far. At this juncture I'm concerned that regulation is so complex that the incentives are muddled and poorly understood," said Hildebrand, who's now vice-chairman of investment firm BlackRock.

This marks a bit of a u-turn for the former regulator. Hildebrand was a regulatory hawk after the crisis, and was one of the architects of the tougher capital rules we have now.

"This will come as a surprise to some people. I was seen as a hardliner," he said.

So why the shift?

Firstly, banks are facing new types of uncertainty from things like extremely loose monetary policy, slowing global growth and a wave of new technology that has the power to fundamentally change their business.

The rules set down in the past few years weren't designed for this kind of world, and there are concerns that they're distorting the ways banks are reacting to all these changes.

Secondly, the new rules coming down the pipe on activities like trading may change the industry in unpredictable ways and lead to limits on how much financing companies and people in the real economy can get their hands on as banks scale back.

Hildebrand said he spoke to former regulatory colleagues and found "strong agreement" that all the rulemaking need to stop.

This is a good example of the current trend of so-called regulatory fatigue, which is seeing banks making loud calls for a pause in the deluge so they can adapt their business models.

It's a powerful argument. But whether or not you think this is a good idea depends on whether you think the global economy is better served by smaller, safer banks or more risk-taking.