FIGURE 5 Number of active sanction designations by the US Treasury 2010–2023, in thousands 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 +6%+8%+23% 4.75.15.5 5.86.0 6.2 6.46.97.88.59.19.411.914.3Russia–Ukraine War Source: Oliver Wyman Forum x NYSE CEO Survey 2024. Oliver Wyman Forum analysis Fundamental changes to the architecture of the global financial system are both readily observable and accelerating. The dollar’s share of global reserves has declined from 71% in 1999 to 58% in 2024, underscoring the ongoing trend towards a more multipolar financial system.16 At the same time, in response to the COVID-19 shock and subsequent supply-chain disruptions, advanced economies adopted industrial policies to increase the resilience of their domestic economies. Russia’s invasion of Ukraine, and the corresponding Western sanctions regimes, acted as a further trigger, accelerating geoeconomic fragmentation and initiating a shift away from the previously globalized economic model.17 Increasingly, financial system participants are making decisions based not only on maximizing returns but also on geoeconomic considerations. The rise of industrial policies and nations’ growing concern about the self-sufficiency of their economies and financial systems can reduce or 1.4 Multipolarity and pressures for fragmentationWhile many economic statecraft instruments, including sanctions, are designed to disrupt the economic activities of targeted entities, unintended consequences can exacerbate their impacts. Since geopolitical actions are difficult for financial markets to anticipate and hedge against, they prompt actors to take risk-averse positions. Such behaviours can create further market dislocation and establish negative feedback loops. Targeted investment restrictions can have a similar effect. While these restrictions may not affect investors’ returns in the short term, they restrict liquidity and increase capital costs in the long term. Investment restrictions can also go beyond shielding those sensitive sectors, raw materials and companies that policy-makers deem vital for national security or domestic resilience, by impacting a sector’s “investability” and affecting asset allocation decisions and investment plans. Economic statecraft measures can therefore have systemic impacts on the global financial system and economy.Western sanctions on Russia following its invasion of Ukraine in 2022 represented the most significant escalation in the use of finance to advance geopolitical objectives. The United States, the European Union and other partners froze nearly $300 billion in Russian central bank reserves, compelled financial market infrastructures to disconnect Russian institutions from their systems, cutting off direct access to global financial markets, and implemented debt and equity listing restrictions. Decline in dollar’s share of global reserves since 1999. Navigating Global Financial System Fragmentation 14

Navigating Global Financial System Fragmentation 2025