Jacek Jastrzębski, Chair of the KNF, delivered a keynote speech on ‘Deregulation as an opportunity and a challenge for the financial market’ at Compliance & Integrity Days 2025 held by Institute Compliance.

The key points of the Chair’s address:

• Deregulation is a buzzword these days and it has been a flagship topic of the majority of conferences recently. Deregulation tends to be presented as a remedy for any ailment. It is necessary to ask a question if this is really the case. What are the challenges or more difficult aspects of deregulation? This requires a nuanced approach with respect to specific segments of the financial market; it may be necessary to approach this topic differently from the perspectives of the banking market and the capital market. 
• As for regulating several aspects of the functioning of the financial market, we have gone too far in our strive for eliminating any risk whatsoever. We have created a world in which risk is limited or, at least, covert. The price to pay for this is the limitation of competitiveness, which is particularly visible in the capital market. 
• The recalibration of that model is a matter that we are facing right now as supervisors and regulators. If we compare the parameters of the EU economy with the economy of, for instance, the United States, we can see that a few years back they were comparable. Now, we can see that the American economy has outperformed us decisively. The matter of overregulation, which results from a different approach to risk, may be one of the reasons for this. 
• Maybe we became too mesmerised by the idea of a world without risk and now we are paying the price of decreased competitiveness of our economy. Maybe this discussion should look a bit differently for the banking sector, which inherently is regulated in a more conservative manner and is based predominantly on the security of deposits, with the bank deposit being the Sèvres standard for the security of funds. The situation is different, however, in the case of the capital market, which in essence should offer higher rates of return, and the higher rates of return must involve higher risk. If we want to suppress risk down to the level of risk for bank deposits, the rights of economics, as the rights of physics, know no mercy. We will inevitably suppress the interest rates, thus creating classes of assets that will, in fact, compete with each other, as there will be no difference in their parameters. Consequently, the direction towards deregulation is, undoubtedly, correctly identified and correctly diagnosed.
• The history of financial market regulation is written from one crisis to another. Usually, there is a period of deregulation, whose beginning we are probably witnessing now, meaning the loosening of the supervisory and regulatory screws, and boosting economic activity, followed at some point by ‘overheating’ and a crisis. Another crisis puts legislators, public actors and supervisors under pressure to propose solutions that would prevent similar events from happening in the future. And here comes a response in the form of another period of overregulation, or so-called ‘regulatory overkill’. After some time, everybody realises that this is excessive and that the corset is too tight, so we go back to easing. And this is how the wheel is spinning.
• Right now, we are at a moment where we have realised that we have gone too far with regulation and a step back is necessary. This is a very difficult task as it is much easier to tighten the screws in the name of security and stability. The task we are facing today, however, is of another nature, and we need to reflect on how far we can responsibly go with this step back, and this task is much more difficult as this is our responsibility not to repeat the errors from the past. One must accept that there will be crisis situations in the financial markets. It would be naive to think, looking at the economic history of the world, that all the crises are already behind us. We must be very responsible in taking the step back and in looking how far back we can go and to what extent we can ease the regulations in the name of economic development and competitiveness so that this step back would not be a step too far.
• As the supervisory authority, we are responsible for stability and security. But our statutory mandate also entails assuring the development of the financial market. Our success is measured by the growth of activity in the financial market and by the higher level of meeting the needs of financial market users, both by issuers and by investors, while retaining a reasonable level of security. A reasonable level, not an absolute one.
• Loosening the corset is a challenge as it means, to some extent, the need to live without a user manual. In some sense, it means jumping in at the deep end as we need to find our inner compass, a system of general rules, values and guidelines arising from provisions of law. 
• Deregulation, in fact, involves shared responsibility because if we are to deregulate the economy, we also expect that other market users will be co-responsible for filling the lacuna created by deregulation properly. As a result of deregulation, procedures must be replaced with values. In the absence of procedures, it is the compass or the beacon of values that remains.  These are the values that set the direction.