Basel Chair Warns Supervisory Fragmentation Could Deepen Global Financial Risks

International cooperation among banking supervisors is becoming harder even as financial risks grow more intertwined, the chair of the global banking rulemaker has said.

Erik Thedéen, who leads the Basel Committee on Banking Supervision, warned that fragmentation in supervision could weaken regulators' ability to spot and contain risks that cut across national borders. He was speaking at the 24th International Conference of Banking Supervisors in Bali.

"Geopolitical tensions are increasingly clouding the outlook," Thedéen said, adding that such strains have already raised doubts about how well supervisors and other agencies will coordinate in the future — whether on artificial intelligence risks or on responding to a future financial crisis.

He set out the consequences of a splintered supervisory landscape: wider information gaps, more room for regulatory arbitrage, and cross-border risks that become harder to identify and manage. "Fragmentation in supervision would ultimately contribute to fragmentation in finance," he said.

International standards exist in part to curb arbitrage, in which firms move activity to jurisdictions with looser rules. The Basel Committee led the post-crisis overhaul of global banking rules, including the Basel III framework, which raised capital and liquidity requirements to make banks more resilient to shocks.

The United States remains among the largest jurisdictions yet to fully implement the final Basel III reforms. US regulators withdrew an earlier proposal after industry opposition and published a revised draft in March.

Thedéen's latest remarks contrast with his stance a year earlier, when he played down concerns about strains in international regulatory ties, saying reports of the death of global cooperation were greatly exaggerated.

He also stressed the importance of independent central banks at a time when the Trump administration has tested the independence of the Federal Reserve.