Risks of Fragmentation in Global Financial Regulation
July 15, 2025
A joint paper published on July 9 by the Bank Policy Institute, GFMA, and the Institute of International Finance argues that fragmentation in global financial regulation puts competition, economic growth, and financial system resilience at risk.
- A 2018 OECD survey estimates that a piecemeal approach to financial sector regulation costs the global economy $780 billion a year.
- A January 2025 World Economic Forum report states that annual economic output losses from fragmentation could range from $0.6 trillion to $5.7 trillion, or about 5% of current GDP.
The paper presents four recommendations:
- The International Monetary Fund, Financial Stability Board (FSB), and Basel Committee should identify national rules that require financial institutions to establish local subsidiaries or restrict branch operations;
- Jurisdictions should review whether ring-fencing requirements are properly calibrated;
- Global regulators and industry should work together to address fragmentation and risks introduced by inconsistencies;
- The FSB should re-evaluate the functioning of international colleges and case management groups.
Yes, but: As reported in recent
CREFC Policy & Capital Markets Briefings, senior U.S. policymakers — including Treasury Secretary Scott Bessent, Fed Chair Jerome Powell, and Fed Vice-Chair of Supervision Michelle Bowman — appear less interested than the previous administration in coordinating with international standard setters.
In April remarks to the American Bankers Association, Bessent stated: