Navigating Global Financial System Fragmentation 2025

Timeline of key events in the global financial system’s evolution FIGURE 3 Foundation of the modern global financial system 1971: US President Nixon ends Bretton Woods system, delinking US dollar from gold standard 1973: First oil crisis creates global economic turbulence 1974: Establishment of petrodollar system between the United States and Saudi Arabia 1979: Second oil crisis reinforces dollar’s dominance Late 1970s: Key institutional changes at US Federal Reserve begin long-term disinflation trend Financial globalization and new technologies Early 1990s: Broader adoption of real-time gross settlement systems transforms transaction capabilities 1991: Soviet Union’s collapse accelerates financial globalization 1995: World Trade Organization (WTO) establishment creates new framework for trade/financial integration Late 1990s: – Rise of electronic trading platforms and internet-based finance – Multiple regional financial crises prompt regulatory reforms 1999: EU introduces euro as an accounting currency, used by 11 member states Fragmentation pressures Early 2010s: Rise of fintech and cryptocurrency alternatives 2013: China announces Belt and Road Initiative 2013: Federal Reserve surprises markets by announcing the tapering of asset purchases 2014: US and EU impose sanctions against Russia after Crimea annexation 2016: Brexit vote signals anti-globalization sentiment 2018: US–China trade war begins 2020: COVID-19 prompts supply-chain restructuring 2022: Russia’s invasion of Ukraine reveals global fault lines – US and EU freeze $282 billion in Russian central bank assets – EU regulations mandate SWIFT to disconnect seven Russian banks Global deregulation and integration 1980s: Major financial deregulation and innovation period begins – Easing of foreign exchange controls – Expansion of derivatives markets – EMDEs shift to export-led growth strategies Continued integration and crisis 2001: Two pivotal events: – China joins WTO, boosting global growth – 9/11 attacks lead United States to use financial system as counterterrorism tool 2008: Global financial crisis halts rapid financial sector expansion 2009: G20 emerges as key coordinator of regulatory response – Creation of Financial Stability Board – Development of Basel III framework1990s 2010s –2020s1980s 2000s1970s The US dollar’s emergence as the foundation of the global financial system stemmed from deliberate policy choices and the unique economic position of the United States in the post-Second World War era through the Bretton Woods system. This international order pegged major international currencies to the US dollar, which itself was pegged to gold, in order to ensure exchange rate and monetary stability, prevent competitive devaluations and promote economic growth through trade. The modern financial system has evolved since the end of the Bretton Woods system in ways that have affirmed the US 1.1 The US dollar’s centralitySource: World Economic Forum and Oliver Wyman Navigating Global Financial System Fragmentation 10