Fragmentation in global financial regulation puts competition, economic growth and financial system resilience at risk, says a joint paper published by GFMA, the Bank Policy Institute (BPI), and the Institute of International Finance (IIF).
“Fragmentation resulting from miscalibration of global standards or excessive regulatory and supervisory divergence can trap capital, liquidity and risk in local markets; create significant financial and operational inefficiencies resulting in additional unnecessary costs to end-users; reduce the capacity of financial firms to serve both domestic and international customers; and may increase fragility, making markets more brittle and less resilient,” the trades wrote in the paper.
A 2018 OECD survey estimated that a piecemeal approach to financial sector regulation costs the global economy about $780 billion each year. The World Economic Forum estimates that fragmentation could reduce global output by as much as $5.7 trillion annually, depending on the degree of fragmentation. That’s equivalent to 5% of world GDP and twice the losses seen during the COVID-19 pandemic.
Global standard-setters, including the Financial Stability Board, International Organization of Securities Commissions and others, initiated a review in 2018 to identify ways to address market fragmentation. Yet despite these efforts, fragmentation continues to increase.
Four recommendations to address fragmentation:
The paper is available here.
– July 2025 –
