From contagion to containment: A review of systemic financial risk and regulatory governance
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Abstract
In an era that is characterized by digitalization and climate-sensitivities, systemic financial risks have become increasingly complex. They threaten the stability of the global market, which is interconnected. This study aims to address a crucial gap in existing literature by reviewing historical and emerging mechanisms of risk propagation alongside other preventive tools. The study used the Preferred Reporting Items for Systematic Reviews and Meta-Analysis (PRISMA) 2020 methodology to shortlist 46 peer-reviewed open-access articles published between 2021–2025. These articles were sourced from ScienceDirect and categorized into three thematic areas: historical propagation, emerging risks, and innovative prevention mechanisms. The review confirms that traditional drivers such as bank failures and interbank contagion remain relevant, as put forth by Andrieş et al. (2022). Additionally, it establishes that modern threats include disruptions caused by to big financial system, climate-transition-shocks, and crypto-financial instability (Crandall, 2025). Hence, technological interventions like artificial intelligence (AI)-based stress testing, blockchain-based transparency, and environmental, social, governance (ESG)-driven risk mitigations are reshaping the financial risk landscape. However, they face regulatory and governance barriers. Thus, the findings of this study primarily emphasize the need to globally harmonize policy frameworks that integrate sustainability, real-time monitoring, and digital innovation. This study entails an integrated, forward-looking synthesis for policymakers who seek resilient financial architectures in an era of technological transformation and environmental uncertainty.
Keywords: Systemic Financial Risk, Risk Propagation, FinTech, Blockchain, ESG, Financial Stability, Risk Management
Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.
Declaration of conflicting interests: The Author declares that there is no conflict of interest.
JEL Classification: G32, G38, O16
Received: 25.02.2025
Revised: 16.05.2025; 10.07.2025; 24.10.2025
Accepted: 26.11.2025
Published online: 28.11.2025
How to cite this paper: Li, S. (2025). From contagion to containment: A review of systemic financial risk and regulatory governance [Special issue]. Journal of Governance and Regulation, 14(4), 342–357. https://doi.org/10.22495/jgrv14i4siart11
