The UBS trader being questioned on suspicion of unauthorised trading which lost the bank $2bn (£1.3bn) alerted his employers himself, the BBC has learnt.
The BBC's business editor, Robert Peston, says UBS's internal controls did not pick up the huge loss allegedly generated by its trader Kweku Adoboli.
He says Mr Adoboli told UBS that he had engaged in unauthorised trades.
The Financial Services Authority, the City regulator, is investigating why UBS did not identify the transactions.
After being alerted, UBS then examined Mr Adoboli's trading positions and informed the Financial Services Authority and the police.
Our correspondent says: "The disclosure that it was Mr Adoboli's decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren't capable of controlling the huge risks that their traders take."
Kweku Adoboli, who was believed to work in the European equities division at UBS, was still being held for questioning on Friday, having been arrested by City of London police at 3:30 on Thursday morning.
'Out of control'
Chris Roebuck, visiting professor at the Cass Business School said: "Why did the systems not spot this before it got totally out of control? This is a key question the risk systems managers must answer - but he must have found a way round the systems to get this far into debt."
UBS would not comment on the matter.
Mr Adoboli has taken on the law firm Kingsley Napley, which also represented Nick Leeson, the rogue trader who brought down Barings Bank.
It has also emerged that UBS has come under pressure from the Swiss government to either close its investment banking operations or separate them from its retail bank.
"Even separation would have profound ramifications, in that a separated investment bank would be deemed by creditors and investors as much riskier than the current integrated, universal-banking form of UBS," Robert Peston says.
The credit rating agency Moody's says it is reviewing UBS's rating, focusing on "ongoing weaknesses" in the Swiss bank's risk management.
Another agency, Standard & Poor's, suggested it was considering lowering the bank's A+ rating.
UBS lost £35bn in the 2007-8 banking crisis and had to be bailed out by Swiss taxpayers.
Moody's said that although UBS was strong enough financially to absorb the loss, it had concerns about its risk controls.
"We have continued to express concerns with regards to the ability of management to develop a robust risk culture and effective control framework," the agency said.
Last month the bank announced 3,500 jobs cuts. Of the 65,000 staff worldwide about 6,000 are in the UK, with the bulk of UBS's investment banking operations based in London and New York.
It has been reported that the fresh losses from the investment bank will lead to a major restructuring of the business, involving thousands more job losses, which will be announced in November.
"We believe that yesterday's event could have personnel consequences on senior management level, which in turn could lead to adjustments to UBS' business portfolio," said Teresa Nielsen, an analyst at the Swiss bank Vontobel.
"The exit from non-core businesses inside the investment bank could be accelerated," she added.