Navigating Global Financial System Fragmentation 2025

Policy recommendations to improve global financial governance TABLE 3 Contend with existing fragmentationPolicy recommendations Increasing time required for implementation Principles Adopt existing best-practice definitions to define guardrails, including the rule of law Clearly define and uphold/uni00A0the/uni00A0rule/uni00A0of/uni00A0law Respect financial and physical property ownership rights Avoid unilaterally expropriating sovereign assets Safeguard independence and/uni00A0bolster capabilities/uni00A0of/uni00A0international/uni00A0institutions Regulate and manage critical financial market infrastructures, but avoid politicizing or severing the underlying rails Ensure parallel financial market infrastructures are/uni00A0interoperable Structure domestic and multilateral/uni00A0 policies/uni00A0and financial regulations/uni00A0 to/uni00A0support/uni00A0financial stability and cross-border flows Shield the independence of fiscal and monetary policy Strengthen adherence to international standards Use regular stress-testing to highlight negative externalities of financial fragmentation Develop interoperability frameworks Anchor the guardrails and promote policy impact Establish a best-practice toolkit for economic statecraft Encourage mutual recognition of comparable standards and interoperability of regulatory regimes Standardize the regulation of cross-border capital, services, goods and data flows Enhance domestic capacity in governance, currencies and capital markets Increase representation for EMDEs Depoliticize decision-making at IFIs Enhance EMDEs’ access to capital Strengthen the global financial safety net Integrate AI, digital assets and fintech into/uni00A0the/uni00A0global regulatory environment Counteract distinct economic blocs with new or strengthened patterns of economic cooperation Establish greater policy cohesion to coordinate/uni00A0between emerging financial blocs Deepen intraregional integration (e.g./uni00A0EU/uni00A0Capital Markets Union)Resist future fragmentationReform the system 1 2 4 5 6 7 83 Source: World Economic Forum and Oliver Wyman Countries’ conflicting geoeconomic interests and the resulting trust deficit among policy-makers is driving fragmentation of the global financial system. Since these diverging interests are likely to persist for the foreseeable future, this report echoes existing research in its call to mitigate the costs of fragmentation and counteract mistrust across the financial system.72Anchor the guardrails and promote policy impact Both the UN and the G20 have in the past helped establish voluntary codes of conduct and norms for addressing challenging governance issues, such as promoting “responsible state behaviour in cyberspace”.73 Similarly, the World Economic Forum has a track record of establishing multistakeholder governance and reporting frameworks such as the Stakeholder Capitalism Metrics. These institutions could 4.1 Contend with existing financial fragmentation Navigating Global Financial System Fragmentation 33