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Jacek Jastrzębski at the opening of FinReg 2023

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Jacek Jastrzębski, the Chair of the KNF Board, delivered opening remarks at the Financial Regulation Congress FinReg 2023, organised by the Allerhand Institute. The Congress is taking place on the premises of the Polish Financial Supervision Authority.

Jacek Jastrzębski highlighted the need to build a long-term perspective of both investors and other participants in the capital market, and what can be seen as some sort of an obstacle in this process is a short-term approach based on the efforts to maximise profits in a short term. This manifests itself in expressions such as ‘playing on the stock exchange’, which may suggest that trading on a stock exchange is similar to a casino or gambling. ‘I believe that following this language pattern itself is detrimental to the capital market. We should convey the message that capital markets are not about playing or gambling. Stock exchanges are not a casino; investing is not gambling. In order to do so, we need a long-term approach and a long-term perspective on all sides, among all participants in the financial market. In order to do so, first of all, we need to have long-term products and long-term relations’, Jacek Jastrzębski said. 

In his opinion, an example where there could be significant potential is employee stock programmes. ‘I believe that this sort of instruments may support the development of capital markets, especially in markets like Poland, where there is no long-lasting tradition of saving or investing in the long term, or retail investors investing directly in capital markets. That’s why I believe such instruments like employee stock programmes or other instruments of a similar kind may be a significant contribution to the development of capital market and may bridge the gap on the demand side, especially if you look at the stock market’, Jacek Jastrzębski said. 

The Chair of the KNF Board also stressed that a long-term relation was something that the Polish financial supervisor put a significant focus on, especially in the area of brokerage and investment supervision. ‘This is related to how financial intermediaries act when dealing with customers, whether they are able to build a long-lasting relationship or they rather focus on short-term gains. This is something that is very high on the agenda of my colleagues from the Capital Market Supervision: to encourage financial intermediaries, especially investment firms, to build long-term relations with their customers. This is related to another strategic goal, which is to strengthen the confidence of retail investors in financial service providers. In order to do so, we must focus very strongly on the first side of the processes, so that all the needs and risk profile of the customer are taken into account’, Jacek Jastrzębski said. 

He believes that the third challenge is related to cross-border activities of firms and to competition. ‘Poland is a large market and an attractive market. We see the activity of foreign-based and foreign-licensed entities entering the Polish market, and, of course, we see the phenomenon of so-called regulatory arbitrage. Given how fast the development of new technologies is and how easy it is to solicit customers and to enter into contracts with entities providing the services from abroad, this is and will be a significant challenge for the years to come, especially that we all know that there are jurisdictions that either adopted a very friendly tax policy or relaxed licensing and supervision policies, thus they might attract businesses. At the same time, these businesses do not operate in the jurisdiction of incorporation or licensing. This is something that we need to take into account while designing a future regulatory framework for financial services in the European Union’, Jacek Jastrzębski said. 

He also said that we need to be aware of generational changes coming. ‘We need to a look at the generations that will be entering the financial market in their capacity as investors in the years to come, and their preferences and their expectations will be very different from what we’ve seen in the past decades. And I can name several examples. One example is their approach to the ESG factors. If we look at surveys about investor preference, we can see that there is a significant change in how much these factors will be taken into account by the generation who will be entering the financial market in the years to come. This is a trend that we need to take into account’, he said. 

In this context, the Chair of the KNF Board pointed to the market in crypto-assets. ‘This is an area of the market which I do not perceive as part of the regular financial market but which may, for various reasons, appear more appealing to the new generation or the younger investors than the traditional one or, let’s say, the real capital market. As regards crypto-assets, there’s a philosophical question: do we want to have crypto-assets become a part of the financial market, with the consequence being some sort of regulation, some sort of supervision, or should we rather separate crypto-assets from the real capital market? In my belief, there’s a significant difference. The financial market is about financing the economy, about transforming the savings into investment. Does the crypto-asset market perform such actions? Not necessarily. In my personal view, our top goal in connection with crypto-assets should be to protect the customers’, Jacek Jastrzębski said. 

‘If we are not cautious enough, we may end up in a situation where the first experience of the new generation coming to the market will be the experience of crypto-assets, and it may be a very painful experience. If such a client gets their fingers burnt, this may affect their attitude to investing in the financial market. So when talking about crypto-assets, we must be very careful not to create the illusion that the crypto market is part of the regulated financial market and it’s equally safe like investing on the stock exchange’, Jacek Jastrzębski added.