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1 4 th Annual GCC Regulators’ Summit 22 nd & 23 rd February 2010, Qatar Gulf Monetary Union : Review & Implications on the Banking Sector Presentation.

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Presentation on theme: "1 4 th Annual GCC Regulators’ Summit 22 nd & 23 rd February 2010, Qatar Gulf Monetary Union : Review & Implications on the Banking Sector Presentation."— Presentation transcript:

1 1 4 th Annual GCC Regulators’ Summit 22 nd & 23 rd February 2010, Qatar Gulf Monetary Union : Review & Implications on the Banking Sector Presentation by Yousif Hassan Yousif Director Retail Banking Supervision

2 Gulf Monetary Union-Objectives Facilitating accomplishment of sustainable and integrated development of the GCC ; ultimate aim is to achieve full economic integration among the GCC States. Acting as the enabler for increased financial stability and economic integration in the Gulf. 2

3 3 Gulf Monetary Union- Review Current Status  GMU Agreement has been signed by four GCC countries.( took effect on 23 rd January 2010).  The Agreement lays down the functions and the direction of the Gulf Monetary Union.  The Articles of Association (AoA) of the Monetary Council as a part of the Agreement; agreed between all the members of the GCC; (signed by the four current members).

4 GMU Agreement The AoA lays down the objectives, functions and necessary requirements of the GMU: a. Co-ordinating economic policies among member countries and achieving high degree of economic integration b. Working towards monetary and financial stability in the region. c. Paving the way for issuing single currency and integrated payment system. 4

5 GMU Agreement d. Facilitating adoption of common banking regulations to ensure financial stability and economic integration. e. Establishing Gulf Monetary Council – a supranational authority consisting of Governors of the central banks of the participating countries, and supported by an executive management. 5

6 Gulf Monetary Council Will spearhead the movement towards formation of the Gulf Central Bank: a supranational authority  The mandate of the Gulf Monetary Council: a. Establish Gulf Central Bank b. Set the deadline for launching common currency c. Draft rules on monetary policies d. Move towards harmonizing the banking supervision regulations and practices. 6

7 7 Regulatory Structure Board of Governors GCC Monetary Council will be replaced by Gulf Central Bank National Supervisory Authorities Banking Supervision Committee

8 Banking Supervision & Regulations  A critical component of GMU is to achieve harmonization of banking supervision regulations.  GCC Banking Supervision Committee involved in harmonizing the supervisory regulations and supervision practices for last many years.  A target operating model for harmonization of GCC banking regulations is being developed. 8

9 Banking Supervision - Regulatory Structure The Gulf Monetary Council will establish the Gulf Central Bank. The Gulf Central Bank will be a supra national authority. The National Supervision Authorities will have operational independence but will be accountable for their duties. 9

10 10 Principles for the Target Operating Model The National Supervision Authorities will have to agree on the following guiding principles for the GCC Banking Supervision Target Operating Model:- Principle 1 :Single market for financial services is only a long term target; the harmonization of supervision is an enabler for the GCC Monetary Union and financial stability. Principle 2: Harmonization shall be achieved step-by step, following a gradual approach

11 11 Principles for the Operating Model …( contd..) Principle 3 : A decentralized model shall be used, with National Authorities retaining responsibility for supervision and control. Principle 4: Common prudential minimum requirements shall be adopted, but National Authorities retain flexibility to impose stricter rules for their banks Principle 5: The Target operating model shall incorporate international best practices as well as recent developments post-crisis.

12 Banking Supervision Target Operating Model Framework 12 a.Coverage of GCC countries b.Types of banks covered (specialized banks, Islamic banks, foreign banks, etc.) c.Coverage of large banking groups d.Coverage of Financial Centers 1.Scope of Application (“Who is being supervised” ) a.Market access/ licensing b.Prudential minimum requirements c.Supervisory review process d.Enforcement mechanisms 3.Primary Supervision & Control Approach (“What and How”) a.Gulf Central Bank b.National authorities c.Delineation of roles and responsibilities d.Exchange of information (vertical/ lateral) 2.Supervisory Institutions (“Who is supervising” ) a.Market discipline b.Collaboration approach cross- border c.Crisis and systemic risk management 4.Supplementary Responsibilities Supervision & Control Framework

13 Operating Model Framework Enforcement powers will rests will the National Authorities Unified application of IAS/IFRS by the member countries Sharing of information between the credit bureau/register of member countries to be followed by establishing a GCC-wide credit register 13

14 Banking Supervision Model :- Implications 14 Widen the scope and depth of banking regulations and supervision while ultimately achieving harmonization Common licensing approach and requirements: common capital requirements GCC wide passporting system in the long term:- allows GCC originating banks to branch out in other member states. Common Prudential Requirements : aligned to Basel II – harmonized threshold for various prudential requirements

15 Banking Supervision Model :- Implications.. (contd..) Harmonizing liquidity risk management requirements. Harmonizing the key periodic reporting requirements. Effective and efficient consolidated supervision Common minimum requirements for the assessment of the corporate governance in banks. 15

16 Banking Supervision Model :- Implications.. (contd..) Improved cross border supervision. GCC –wide crisis and systemic risk management GCC wide Credit Register/Bureau Common Code of practice for external auditors and rating agencies 16

17 Issues to be resolved Lender of Last Resort Monetary Policy for the region Coverage of Islamic Banking Issuing of banking legislations by respective governments 17

18 18 Any Questions Please ???? End of Presentation

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