The Bank for International Settlements published a BIS Bulletin analysing how regional trade and banking linkages among emerging market economies (EMEs) have evolved as global integration has slowed, and how far stronger regional ties can offset fragmentation. The bulletin argues that regional integration generally complements rather than replaces global integration, with emerging Asia showing the deepest regional integration, supported by manufacturing-led supply chains and the role of Hong Kong SAR and Singapore as regional financial centres. The analysis highlights that regional demand remains modest relative to extraregional demand in key EME regions, including Latin America where nearly 40% of value added in goods is induced by final demand outside the region versus 2.7% from within the region. It also documents rising regional banking integration in emerging Asia and Latin America from 2017 to 2023, with emerging Asia’s intraregional share of cross-border banking around 60%, while the high share of US dollar lending (about 80% in EMEs) is presented as a constraint on deeper regionalisation. Trade and banking integration are described as mutually reinforcing, with regional payment system integration lowering transaction costs and enabling cross-border banking services, and intraregional banking flows shown to be less sensitive to global shocks than flows from outside the region. The bulletin points to remaining trade barriers, including average tariffs of 6.8% in southern Asia and 2.0% in Latin America, alongside non-tariff measures and services trade restrictions, and it outlines structural policy levers focused on cross-border cooperation, targeted trade and banking liberalisation, payments integration and supervisory cooperation.

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