It’s all about the role of money - speech by Nathanaël Benjamin

Benjamin's speech is a financial stability framework piece: everything the Bank does is mapped back to money's three functions. No monetary policy content, no rates signal. The tradeable content is regulatory: firm pushback on broad-based capital requirement cuts, confirmation of the FPC's July 2026 buffer usability and leverage package, and an explicit no to direct hedge fund leverage limits in favour of activity-based measures in gilt repo.

What’s new: Nothing new for rates. On regulation, the notable line is the explicit rejection of entity-level hedge fund leverage regulation, which is the clearest personal statement yet from an FPC member on that debate. Everything else restates the July 2026 FSR/FSiF, the December 2025 capital literature review and the systemic stablecoin regime.

KEY FINDINGS

• Says the case for direct regulation of hedge fund leverage is no: "trying to control directly how leveraged hedge funds can get doesn't strike me as the best course of action to address the issues," with the policy focus on activities rather than participant types. Removes tail risk of UK entity-level leverage caps on hedge funds and points the regulatory burden toward gilt repo market structure instead.
• Broad-based capital relief is rejected: the FPC found no sign of lending being restricted to protect capital, lending has grown, and UK bank returns have exceeded cost of capital. Caps hopes for across-the-board UK capital cuts, so the bull case for UK bank equity rests on the narrower usability and leverage fixes.
• Confirms the FPC's July 2026 package to strengthen buffer usability and releasability, and to remove leverage ratio features that penalised UK domestic lending more than other jurisdictions. Marginally positive for UK domestic lenders' balance sheet capacity without a headline requirement cut.
• Gilt repo reform remains live: "doing nothing is not an option," with greater central clearing and minimum haircuts on non-centrally cleared trades under discussion. Higher clearing and haircut costs for leveraged gilt basis and repo activity, a structural drag on gilt market liquidity provision over time.
• Reaffirms the multi-money vision: systemic stablecoins must hold high-quality backing including central bank deposits and be redeemable at par, with central bank money as the anchor. Keeps UK stablecoin issuance economics tied to reserve-backed models rather than yield-bearing structures.

FROM THE DOCUMENT

Hence, trying to control directly how leveraged hedge funds can get doesn’t strike me as the best course of action to address the issues.

the FPC found no sign of lending being restricted by banks to protect their capital position, on the contrary bank lending has increased and they have continued to supply credit to households and businesses despite the deterioration in the macroeconomic outlook and heightened uncertainty

For example, we identified some unintended features in the existing leverage ratio regime, which caused domestic lending to be more penalised in the UK than in other jurisdictions.

But such improved resilience is not yet locked permanently into the structure of these markets. So doing nothing is not an option.