“Financial markets risk fragmentation and rising costs because of “manifest weaknesses” in the tools for resolving cross-border disputes, a senior watchdog has warned.

“With tensions between the US and EU over derivatives rules intensifying, David Wright, the secretary-general of the International Organisation of Securities Commissions, said institutions – including his own – should offer mediation services between countries to ease frictions over regulation.

“The G20’s push for harmonised approaches to derivatives, bank capital, and shadow banking will founder as countries go their separate ways when enacting detailed rules, he said in an interview.

“’The real question is will all these rules be implemented and applied and what happens if they are not?’ he said, adding that we are seeing a ‘myriad of complexity and fragmentation’.”

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