The similar nature of their economic structure implies that they have common sources of strengths and weakness in their financial systems. They are heavily dependent on their natural resources which are in the process of being depleted. Hence the GCC nations have made diversification of their economic activities as a long-term policy objective. Their financial sector has a central role to play in this strategy of economic diversification. The financial sector is like an intermediary contributing to the economic development of the GCC countries through creation of profits and employment. It also helps in efficient allocation of the financial resources. Hence to tap this potential, the GCC countries have decided to develop a central bank known as Central Bank for Gulf Cooperation Council to help in the domestic regulatory and supervisory framework by participating in the financial institutions and through grants and subsidies. The GCC economies are facing a lot of political turmoil and this can have negative consequences in the financial markets and in the foreign direct investment in these countries. In this report we will analyses the role to be played by the proposed Central Bank for Gulf Cooperation Council towards the economy in these countries. Discussion The real GDP of the economies of GCC grew at a yearly average rate of 4.7% between 2000 and 2010. Compare to this the OECD have only attained an annual growth rate of 1.5%. But it is less than the average growth rate of the BRIC countries which is 8% year-on-year. Figure 1: Real GDP Growth Rate Source: World Bank WDI, IMF projection The Central Bank of GCC has to protect their financial structure form global financial crisis. The Central Bank needs to capitalize their banks so that they can meet the minimum capital adequacy ratio and a comfortable leverage ratio as per the international standard. Still there exists a risk of a possible worsening of the asset quality of the banks due to a worsening of balance sheets. Such risk gets increased for economies which have high credit growth rates just prior to any crisis (Strom, Rasmussen and Robinson, 2011). The GCC banks have indicated some weakness in regard with the operational aspects of the GCC banks and hence the Central bank needs to frame policy which removes this weakness. It was seen that a few GCC countries have witnessed a rapid growth in the credit during the oil boom period just prior to the financial crisis. This showed that this rise in the available bank liquidity and increase in the lending rates was associated with higher oil prices (Accenture, 2011). This gave rise to the risk and high liquidity volatility in their banks. It has been seen in the international market that the rapid growth in credit in times of high growth rate results in degrading the asset quality as the situation worsens. Here it was seen that with sharp fall in the oil prices have led to slowdown in the growth rate and also have degraded the asset quality of the banks and in turn puts a strain in the liquidity position of the banks. Hence the Central bank of GCC needs to evaluate their policy measures so that the effect of oil prices doesn’t have significant impact on their financial sector. The Central Bank of GCC also needs to take into account the bank’
Suggested Central Bank for Gulf Cooperation Council (GCC) Executive Summary GCC Central Bank is a proposed bank in the GCC countries which needs to make policy formulation as per the economic condition of the countries. In this report we will analyses how the GCC central bank operates and how it is compared to the European Central bank…
), also known as the Gulf Cooperation Council (GCC ) is a political and economic union of the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait. Created on May 25, 1981, the original 630-million-acre (2,500,000 km2) Council comprised the Persian Gulf states of the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait.
Central banks conducts monetary policy through regulating money supply and interest rates. The main objectives of the monetary policies of the central bank are to keep inflation under control and unemployment rate low with a view to stimulate economic growth. The autonomy of central banks insulates their operations from political intervention.
This paper analyses the structure of the proposed central bank for GCC, its objectives and functions as well as why the implementation has been retarded. Introduction Economic structures of countries in the GCC region are similar as most of them have their GDP majorly influenced by natural minerals and more so hydrocarbon sectors.
Unlike any straight forward banking system, this has to integrate all most of the characteristics of all its affiliates to promote efficiency and effectiveness in banking within the region. The structure would therefore be quite different from those of single country central banking systems.
The formation of the Central Bank includes a study of the probable form or structure of the Central Bank in GCC. The operations of the Central Bank in GCC have been compared to the operations of the European Central bank based in Frankfurt, Germany. The arguments in favour and opposing the formation of the Central Bank have been provided in this piece of work.
They also offer financial services to potential investors both from the local and foreign market. However, the banking sector among the Islamic states still remains to be underdeveloped and lags behind in
The two will see the formulation of financial policies in the region that will help deal with the issue of inflation and interest rates. This is bound to give the oil rich region more control over their economy and balance trade within
cts including its structure, similarities or differences from the European Central Bank and arguments along with counter-arguments against GCC Central Bank will be duly considered for discussion in this assignment.
In relation to the above context, it can be apparently observed
Hunger issues have been bedeviling Americans since the year 2008 when the recession kicked in. Eight years later the issue is still to be addressed thou statistics indicates that the number of people faced
4 pages (1000 words)Assignment
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