Key facts
- International cooperation among banking supervisors is becoming more difficult.
- Financial risks are growing more interconnected.
- Fragmentation in supervision could make it harder to identify and manage cross-border risks.
- Geopolitical tensions are increasingly clouding the outlook.
- The US has yet to fully implement the final Basel III reforms.
International cooperation among banking supervisors is becoming more difficult just as financial risks grow more interconnected, according to Erik Thedéen, chair of the Basel Committee on Banking Supervision. Thedéen warned that fragmentation in supervision could make it harder for regulators to identify and manage risks that span multiple jurisdictions. He also underlined the importance of independent central banks, at a time when US President Donald Trump's administration has tested the independence of the Federal Reserve. "Geopolitical tensions are increasingly clouding the outlook," he said. Such tensions have already raised questions about how well supervisors and other agencies will coordinate in future, on anything from the risks associated with artificial intelligence to responses to a future financial crisis, he said. "Fragmentation in supervision would ultimately contribute to fragmentation in finance. Information gaps would widen. Opportunities for arbitrage would grow. Cross-border risks would become harder to identify and manage," Thedéen said in a speech to the 24th International Conference of Banking Supervisors in Bali. International standards are designed in part to limit regulatory arbitrage, where financial firms shift activities to jurisdictions with less stringent rules. The remarks come a year after Thedéen sought to play down concerns about strains in international regulatory ties, saying in 2025 that "reports of the death of global cooperation are greatly exaggerated." The Basel Committee on Banking Supervision led the post-financial crisis overhaul of global banking rules, including the Basel III framework, which raised capital and liquidity requirements that aimed at making banks more resilient to shocks. The US remains one of the largest jurisdictions yet to implement the final Basel III reforms in full. US regulators withdrew an earlier proposal following industry opposition and published a revised draft in March.