Central Bank Trends for 2026: A Future Perspective

Walid Dalil
It can be said that global financial stability is today at a historic crossroads where economic challenges intersect with technological, environmental, and geopolitical transformations. The Global Financial Stability Report from the International Monetary Fund (2025) indicates that the global financial system appears superficially calmer, yet beneath this surface lies a high degree of structural fragility in foreign exchange markets, sovereign debt markets, and non-bank financial institutions. These structural risks necessitate a more integrated and flexible approach to international financial governance, which should reassess the traditional roles of both the IMF and the World Bank. On one hand, the IMF is expected to remain the cornerstone of the financial stability framework, but with updated tasks that include addressing digital risks, managing sovereign shocks, and enhancing transparency in capital flows.
On the institutional front, both the IMF and the World Bank face increasing challenges amid a financial environment characterised by multipolarity and the evolution of digital tools. The IMF is moving towards expanding macroprudential oversight and adopting technology in risk analysis, while the World Bank is striving to enhance financial sustainability and support green and digital financing to build long-term structural resilience. These trends reveal a redefinition of the essence of global financial governance, combining financial stability tools with adaptation to the digital revolution and interconnectivity transformation.
Capital markets have become more concentrated in one country, with the United States accounting for approximately 55% of the global stock market, up from 30% two decades ago. More worryingly, valuations of many assets exceed fair value, raising concerns about deep price corrections that could severely damage individuals’ savings and investors’ wealth, and the sustainable growth of nations and financial stability.
Non-bank financial institutions have become more active in directing savings into investments since 2008, and their interconnections with banks have increased over time. Some financial institutions may face pressure due to rising waves of selling, leading to reduced leverage ratios in the sector and consequently exacerbating market disruptions.
Global sovereign debt levels have seen a significant increase over the last decade, rising to about 93% of global economic output, up from 78% just ten years ago. This reflects an increasing reliance on government borrowing to finance public expenditure. This has coincided with rising financing costs at both nominal and real rates, increasing the burden of debt service.
Recommendations for Central Banks:
Central banks should consider the risks arising from their increasing interconnectedness with non-bank financial institutions. This requires banks to fully implement the Basel III Agreement and other internationally agreed regulatory standards.
There is a need to enhance the resilience of bond markets by adopting more efficient financial and regulatory policies, given the ongoing rise in sovereign debt levels. This necessitates expanding the scope of central clearing for bonds to ensure safe, transparent settlement of transactions and mitigate counterparty risks that could affect market stability.
Emerging markets are shifting from reliance on short-term government bonds to issuing medium- and long-term bonds, thereby contributing to financial stability by reducing refinancing risks and alleviating pressure on public budgets amid market volatility.
Central banks and non-bank financial institutions should diversify their asset portfolios across currencies and commodities, avoiding excessive reliance on the US dollar, particularly given its declining value.
In parallel, the BRICS group is emerging as a key player in reshaping the global financial system by promoting the use of local currencies and developing alternative institutions, such as the New Development Bank and the BRICS Pay platform for cross-border payments, to build a more equitable and inclusive multipolar financial system.
Capital markets are a fundamental factor in sustainable economic growth and among the most important mechanisms for raising funds and efficiently allocating resources. Therefore, the stability of these markets and the financial institutions that mediate them is crucial for the macroeconomy, especially in light of increased market volatility and economic uncertainty, as is the case now. The IMF report published in April 2025 on global financial stability noted that the assessment of global financial stability risks has markedly increased, driven by tightening financial conditions and worsening trade and geopolitical uncertainty.
Central banks should accelerate the pace of interest rate cuts in line with inflation targets to reduce the burden of debt service on state, household, and corporate budgets, thereby contributing to financial stability and reducing the risk of defaults, especially amid rising global sovereign debt levels.
Enhancing the sustainability of the pension system and developing it by raising retirement savings rates for older people, thereby addressing the challenges posed by population ageing to financial stability.
It is essential for central banks to tighten controls on mortgage lending to individuals while ensuring that banks maintain a balanced credit portfolio to limit excessive concentration in this type of lending, thereby strengthening the resilience of the financial system and sustaining economic stability.
The prospects for global financial stability… A look at the current performance of the IMF and the World Bank, which provided a forward-looking perspective on enhancing the roles of the IMF, the World Bank, and other financial institutions, as follows:
International Monetary Fund (IMF): The IMF’s role is likely to evolve in the coming phase towards greater institutional flexibility and expanded analysis of systemic risks. The “Global Financial Stability Report 2025” indicates that major risks are no longer confined to banking institutions but extend to unregulated markets and digital payment systems. The Fund has warned of increasing fragility in foreign exchange markets and the growing exposure of non-bank institutions, calling for expanded macroprudential oversight and improved transparency in capital flows. In light of this, the Fund is expected to reshape its tools on two main levels: first, expanding short-term preventive lending tools, such as the Short-term Liquidity Line, to safeguard countries against immediate liquidity crises; and second, integrating technology into financial oversight and analysis through artificial intelligence and big data, in order to develop early warning systems that predict crises and identify market imbalances before they escalate.
World Bank: It is expected to shift from a traditional development finance institution to a key player in building structural financial resilience. Repeated crises have revealed the vulnerability of developing countries to external shocks, necessitating flexible financing linked to long-term structural reforms. In this context, the Bank calls for expanding concessional financing and technical support to build digital financial systems capable of absorbing shocks and supporting inclusive growth.
Other Financial Institutions: With the shift towards a multipolar financial system, other international financial institutions, such as the Bank for International Settlements (BIS) and regional institutions like the Asian Infrastructure Investment Bank (AIIB) and the African Development Bank (AfDB), are expected to play a more integrated role in supporting the stability of the global financial system. Recent studies indicate that coordination among these institutions can create a more graduated and resilient financial safety net, where regional mechanisms serve as the first line of defence, while the IMF and World Bank manage global coordination and large-scale financing. However, experts warn that the multiplicity of actors could lead to overlapping mandates and conflicting responses unless clear governance frameworks are established to delineate roles and responsibilities.
Shift towards Digital Governance and Green Financing: These are pivotal trends that will reshape the roles of international financial institutions. Literature shows that the future of financial stability will depend on these institutions’ ability to manage risks arising from digitisation—such as cybersecurity, real-time payment systems, and central bank digital currencies—while integrating climate dimensions into financial stability assessments. Both Bretton Woods institutions are expected to adopt a dual framework that combines oversight of digital and cyber risks within financial stability mechanisms and support climate financing and the green transition as part of long-term economic stability. These new directions redefine financial stability as a “hybrid” concept encompassing liquidity, technological efficiency, and environmental resilience.

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