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Deepening Divides: The Cost of a More Fragmented Financial System
The period spanning 2025 and early 2026 marked a turning point for the global trade and financial systems as states deployed economic statecraft on a scale not seen in the modern era, accelerating and deepening fragmentation.
This insight report offers new quantitative analysis that measures the economic drag of current trade and financial policies as well as the potential cost of an increasingly plausible worst-case scenario.
Deepening Divides: The Cost of a More Fragmented Financial System
The period spanning 2025 and early 2026 marked a turning point for the global trade and financial systems as states deployed economic statecraft on a scale not seen in the modern era, accelerating and deepening fragmentation.
This insight report offers new quantitative analysis that measures the economic drag of current trade and financial policies as well as the potential cost of an increasingly plausible worst-case scenario.
Navigating Global Financial System Fragmentation
As states increasingly use the global financial system to advance geopolitical objectives, there is a risk of financial system fragmentation.
This report aims to measure the costs of fragmentation and proposes frameworks to both protect the integrity of the global financial system – emphasizing the eight important principles that underpin the effective functioning of financial services globally – and design economic statecraft policies that protect national security and sovereignty without reducing global prosperity.
Is global trade and financial fragmentation here to stay?
Global trade and financial fragmentation are reshaping capital flows, production patterns and economic policy. As restrictive measures become self-reinforcing, policymakers face growing pressure to preserve financial stability while balancing resilience and security objectives.
Yesterday’s risk, today’s reality: A fragmented financial system
Global financial fragmentation has shifted from a theoretical risk to a present reality for businesses and policymakers. As national interests increasingly shape financial policy, leaders must prepare for higher credit, currency and cross-border operating risks while preserving guardrails for global stability.
Is Finance Dividing Us?
From the growing use of the renminbi in cross-border transactions to the rise of the Cross-Border Interbank Payment System (CIPS), China is creating its own financial infrastructure that is increasingly competing with the long-established Western system. As governments and companies consider their relationships in competing geoeconomic blocs, will they have to choose a financial side?
Why international finance centres like Hong Kong are crucial connectors in a fragmented world
The global financial system faces an increasing risk of fragmentation from geopolitical tensions and macroeconomic complexities. In the current landscape, international financial centres are crucial to building and maintaining global connection.
Media Briefing: Stemming Financial System Fragmentation
An integrated global financial system is crucial for economic growth and human development. Combating increasing fragmentation enables effective channelling of savings and investment in small and medium-sized enterprises, the innovation economy and communities.
The global financial system keeps the world stable and unified. Here's how to strengthen it
Rising geopolitical tensions threaten to fragment the global financial system. Economic losses from fragmentation could be as much as 5% of global GDP. The World Economic Forum and Oliver Wyman have developed a proposed framework for strengthening the global financial network.
Stemming Financial Fragmentation
Financial systems have historically helped to support economic growth and advance human development, but in 2022 geopolitical and economic shocks led to a 50% decline in global financial flows. As tensions persist, states are exerting political pressure on finance and exploring the construction of parallel systems.