Key Insights: Top Priorities of the Central Banks from across the World – An Outcome of the Central Bank Survey

In a recent dialogue hosted by Intellect Design Arena Ltd., key insights were shared regarding the evolving priorities of central banks worldwide, as derived from a comprehensive survey. This survey engaged various central banks and highlighted three significant priorities that shape current monetary policies and operational strategies.

1. Financial Stability: Over 45% of central banks prioritize financial stability and resilience, especially in light of the ongoing global trade tensions initiated by the U.S. This focus reflects a renewed emphasis on maintaining economic stability amidst external shocks.
2. Inflation Management: Approximately 43% of central banks consider inflation management a top priority. While global inflation rates have shown some subsidence, the potential for increases, particularly in advanced economies, necessitates ongoing vigilance and policy adjustments.
3. Cybersecurity: An emerging focus for central banks, with 49% identifying cybersecurity and AI application as critical for the next decade. This reflects growing concerns about cyber threats and the need for robust defenses against ransomware and other attacks.

Digital Transformation Efforts

1. Cloud Adoption: About 40% of central banks are experimenting with cloud infrastructure, indicating a shift towards modernizing their technological frameworks. This move aims to improve efficiency and security in operations.
2. Digital transformation: About 84% of central banks acknowledge the importance of digital transformation and they are at various stages of transforming the central bank backbone.
3. AI Strategy: 55% of central banks are actively exploring AI strategies, recognizing its potential to enhance decision-making processes and operational efficiency. Successful implementation hinges on the quality of data governance and integration.
4. Central Bank Digital Currency (CBDC): 95% of central banks are at various stages of exploring CBDCs, although only a small percentage have moved to production. The complexities of monetary policy transmission and public acceptance remain significant hurdles.

Challenges in Transformation

1. Legacy Systems: Approximately 67% of central banks operate on technology that is 10-30 years old, complicating efforts to modernize. High reliance on outdated systems leads to significant delays in policy implementation, often exceeding six months.
2. Disruption from Fintech: 63% of central banks report moderate to significant disruption caused by fintech innovations. This highlights the necessity for collaboration with fintechs to foster innovation and adapt to changing market dynamics.
3. Regulatory Challenges: Central banks face regulatory pressures that complicate the integration of new technologies. Many are exploring regulatory sandboxes to facilitate innovation while ensuring compliance.

Key Focus Areas for Collaboration

1. Engagement with Fintechs: 65% of central banks view collaboration with fintechs as essential for fostering innovation. This collaboration can drive advancements in payment systems and digital services.
2. Financial Inclusion: 88% of central banks focus on financial inclusion as a critical area, addressing the needs of unbanked populations while aligning with global initiatives from organizations like the IMF and World Bank.
3. Policy Implementation Agility: Central banks recognize the need for enhanced agility in policy implementation, particularly in response to economic disruptions. Improved digital frameworks and collaboration can facilitate faster decision-making processes.