How should be the structure of the suggested Central Bank for GCC How might this bank be similar or different from the European Central Bank What are the arguments for and against the GCC central bank. What are the most important objectives and function - Essay Example

The Central bank The central bank. In an attempt to enjoy unique position in future, the GCC s had to restructure its banking system. They put forward suggestions to modify their banking techniques. They were no longer ready to continue overlooking the structural modifications in the world economy and the influences on it’s the member states. They had already learnt a lesson from the previous price hiking. However, this was only to be achieved when the GCC enters the monetary integration with foreign economies.

(Dolcker,2010). The projected Gulf Monetary Union has the latent of affecting the GCC countries by moving them from a quasi-monetary union in which they did not enjoy any monetary autonomy to an arrangement in which monetary policy can be more readily tuned to countering inflation, addressing economic fluctuations, adapting to business cycle developments and reacting to changing global economic conditions. The structure would stand for a vital development for the region that has ascended to eminence over the past years on the global stage and is embarked on an ambitious project to diversify their economies from dependence on energy commodities extraction.

The setting of the GCB would be vital in the preparing to move towards setting-up the GCB. The structure will be required to decide the capital of the GCB, for instance, the endowment that each member state will abide by the new institution. The suggested structure of the central bank foe GCC has the capability to move the GCC countries from quasi and monetary union. The structure should enable GCC to hold regular dialogue with European Union on financial and economic matters to exchange views on macroeconomics a top official level.

The bank intends to organize yearly joint forums on this cooperation experience. (Dolcker,2010). The structure of the suggested central bank hold has to hold meeting that are technical to examine issues such as Islamic banking system and systems of taxation. The suggested structure of the central bank of GCC should address the structure of the market and competitive situations in Arab GCC system of banking. The proposed structure is to examine if the funding of banks can amplify procyclicality.

From statics, the structure should allow the bank having higher wholesale dependence to stop lending. In the investment, the bank structure encourages investment to be done mutually and development of medium-sized enterprises among member states of GCC. (Berger, 2005). In the recent past, the central bank of GCC and the European central bank were at the same level. This was the time when inflation was at the same level in both regions. The only similarity between the GCC central bank and European central bank is the initiative of incorporation.

as a result, following the issuance of their single currency, the Gulf countries were likely to face disputes that are very dissimilar to those allied with the Euro crisis currently. There exists a fundamental diversity between the two banks. Firstly, It is a fact that the GCC states operates under different political, economic and social policies which is a contrary to the European states. Secondly, The central bank of the GCC differs from the central bank of Europe; the difference is portrayed in the issues of rate of inflation.

This difference is expected in the coming days whereby with the size of the oil resources reducing and the government spending more. The political interests and commitment is wanting among the GCC. The sovereignty of the institution pertaining single currency continuity and stability differs with that of the European, as the central bank of the European is stable. (Berger, 2005). The supporters of the GCC central bank claim that the currency of the GCC may be associated with the United States dollar in which the United States dollar would have a bigger share.

In addition, the United Arab Emirates was against the GCC central bank basing its argument on the fact that a larger portion of the GCC institutions were centered in Saudi Arabia and on adoption, the currency would be the only authorized tender in Saudi Arabia. For them, without the monetary union creation would have been beneficial to GCC than just Saudi Arabia in economy and security. The central bank has received criticisms. One of the reasons being the fact that as the GCC develops powerfully in economy and military, their relations in the sub-regions and tensions will affect their capability to be involved in larger crisis in middle east and north of Africa.

Their new willingness to engage military and spend resources on development revolution could affect negatively on the new governments’ shape and their neighbors could be unable to recover economically. For example, Syria has elicited the most strident position on moral grounds from the GCC countries. The state shave proved their support towards Syria and this tips the conflicts in the Middle East states diplomacy. (Dolcker,2010). In conclusion, despite the difficulties of the GCC states attaining the top position.

It has benefitted partly from the process. This can be clearly portrayed in the functions of the central bank of the GCC. The central bank of GCC has several objectives and responsibilities. Among them is, the formulation of regulations that are similar in areas such as finance, religion, trade, legislation, customs, tourism, and administration. Another objective is to foster the progress of science and technology in industries such as the mining and water resources. The bank intends to establish centers for research and joint businesses.

(Soledad M. 2010). Another objective of the central bank of GCC is to unify the presence of military and tightening the relationship among people and private sector encouragement. Lastly, the GCC central bank intends to establish a single currency that is stable. Among the functions are: Issuing banknotes with coin minting and currency re-issue, Managing and controlling the Qatari Riyal exchange rate against one currency or more, the special drawing rights, or any other arrangements in order to preserve the foreign value of the Qatari Riyal.

(Soledad M. 2010). Another function is to establish and enforce the monetary policy, control the liquidity in the national economy, work in the open market, and deduct the financial instruments when submitted by banks, subject to the terms and conditions specified by the Bank. Finally, Issuing and management of public debt bonds in addition to the payment of their value, profit and commissions, as the financial agent of the State. References Al Hassana, M. (2010). The GCC banking sector: Topography and analysis.

Washington DC. Washing DC printing press. Berger, A. (2005). Corporate governance and bank performance: Arizona: Arizona University Press. Espinosa, R. (2010). Nonperforming loans in the GCC banking system and their macroeconomic effects. New York. Prentice Hall. Dolcker T. (2010). Competitive conditions in Islamic and conventional banking: Cambridge. Elsevier, Rocha, R. (2010). Bank Competition in the Middle East and Northern Africa Region. Cambridge; Cambridge University press Soledad M. 2010. Bank competition in the Middle East and northern Africa region.

Turkey: Rima press .