Fragmentation in Global Financial Markets: Good or Bad for Financial Stability?

29 Pages Posted: 8 Oct 2019

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Date Written: October 1, 2019


The many regulatory reforms following the Great Financial Crisis of 2007-09 have most often been designed and adopted through an international cooperative process. As such, actions have tended to harmonise national approaches and diminish inconsistencies. Nevertheless, some market participants and policymakers have recently raised concerns over an unwanted and unnecessary degree of fragmentation in financial markets globally, with possibly adverse effects for financial stability. This paper reviews the degree of fragmentation in various markets and classifies its possible causes. It then reviews whether fragmentation is necessarily detrimental to financial stability, suggesting that, as is more likely, various trade-offs exist. To identify and assess the scope for Pareto improvements, it concludes by outlining areas for further analysis.

Keywords: financial stability, fragmentation, segmentation, financial integration, regulation, international cooperation

JEL Classification: G15, F30, G11, G12

Suggested Citation

Claessens, Stijn, Fragmentation in Global Financial Markets: Good or Bad for Financial Stability? (October 1, 2019). BIS Working Paper No. 815, Available at SSRN:

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

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