De Nederlandsche Bank President Klaas Knot used a speech at the High Level IMF Constituency Meeting in Amsterdam to warn that geo-economic fragmentation is raising economic costs and increasing financial stability risks, and argued that central banks should help limit the damage by defending the international rules-based financial order and maintaining constructive cross-border policy relationships. Knot highlighted direct economic impacts from trade restrictions, including higher import prices, market segmentation and reduced access to technology and knowledge. He linked fragmentation to financial stability channels such as weaker growth and higher inflation driving bank and non-bank credit and market losses, restrictions on capital and investment flows reducing portfolio diversification, and heightened threats from state-sponsored cyber-attacks. He also stressed that a more fragmented environment could make coordinated responses to cross-border shocks harder, undermining the ability to address the most important financial stability challenges that require international cooperation. Alongside global cooperation, he called for further European integration, including deepening the internal market, completing the banking union and working towards a capital markets union, and pointed to the IMF constituency as a practical forum for closer cooperation, including with like-minded non-EU countries.
De Nederlandsche Bank 2025-02-14
De Nederlandsche Bank's Klaas Knot urges central banks to limit geo-economic fragmentation costs and deepen European integration
De Nederlandsche Bank President Klaas Knot warned at the High Level IMF Constituency Meeting that geo-economic fragmentation is raising economic costs and financial stability risks. He stressed the need for central banks to defend the international rules-based financial order and maintain cross-border policy relationships. Knot also advocated for further European integration and highlighted the IMF constituency as a forum for closer cooperation.