Transcript Bahrain

4th Annual GCC Regulators’ Summit
22nd & 23rd February 2010, Qatar
Gulf Monetary Union: Review
& Implications on the
Banking Sector
Presentation by
Yousif Hassan Yousif
Director
Retail Banking Supervision
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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.
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Gulf Monetary Union- Review
Current Status
GMU Agreement has been signed by four
GCC countries.( took effect on 23rd 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).
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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.
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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.
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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.
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Regulatory Structure
Board of Governors
GCC Monetary Council
Banking Supervision
Committee
will be replaced by
Gulf Central Bank
National Supervisory
Authorities
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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.
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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.
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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
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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.
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Banking Supervision Target Operating Model Framework
1.
2.
Scope of Application
(“Who is supervising”)
(“Who is being supervised”)
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
3.
Primary Supervision &
Control Approach
Supervisory Institutions
a. Gulf Central Bank
b. National authorities
c. Delineation of roles and
responsibilities
d. Exchange of information
(vertical/ lateral)
Supervision
& Control
Framework
4.
Supplementary
Responsibilities
(“What and How”)
a. Market access/ licensing
b. Prudential minimum
requirements
c. Supervisory review process
d. Enforcement mechanisms
a. Market discipline
b. Collaboration approach crossborder
c. Crisis and systemic risk
management
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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
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Banking Supervision Model :Implications
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
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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.
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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
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Issues to be resolved
Lender of Last Resort
Monetary Policy for the region
Coverage of Islamic Banking
Issuing of banking legislations by
respective governments
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Any Questions Please ????
End of Presentation
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