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Fragmentation in global financial markets: good or bad for financial stability?

Stijn Claessens

No 815, BIS Working Papers from Bank for International Settlements

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G15 F30 G11 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-ore
Date: 2019-10
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