Mary-Elizabeth McMunn: Capital, competition, and complexity - regulatory perspectives on the regulatory debate

What the desk is arguing

The desk argues that the regulatory landscape remains a key variable for bank profitability and risk appetite, with implications for currency markets through capital flows and risk sentiment. The speech underscores that regulators are still focused on tightening standards, which could constrain leverage and reduce speculative positioning.

This thesis is supported by the consistent tone from central bank officials globally, who emphasize resilience over growth. The Irish Deputy Governor's remarks align with the broader BIS narrative that regulatory reforms are incomplete, suggesting continued headwinds for risk assets.

The desk implicitly rejects the view that regulatory fatigue will lead to a rollback of post-crisis rules. Instead, they see a steady state of high capital requirements and complexity, which favors a structural bid for low-volatility currencies like the CHF and a headwind for high-beta FX pairs.