RIYADH, 19 May 2005 — The GCC banking conference concluded here yesterday with a call for monetary union by 2010 and opening of more branches of GCC banks in the Gulf states on the way to greater integration of the capital market. However, it left open the option of GCC banks’ merger to the individual states as any regimented pace of change could be counterproductive.
Earlier Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency (SAMA), announced that many licenses would be issued to brokerage firms in the Kingdom in the near future to facilitate share transactions in the SR1 trillion plus stock market, which will see a slew of initial public offerings (IPOs) next year.
The concluding session was attended by Al-Sayari, Salem Al-Sabah, governor of the Central Bank of Kuwait, Sultan Al-Swaidy, governor of the UAE Central Bank, Rashid Al-Meraj, governor of Bahrain Monetary Agency, Hamoud Sangour Al-Zadjali of Oman Central Bank and Abdullah Al-Attiyah, governor of Qatar Central Bank. Dr. Abdulrahman Al-Humaidi chaired the session.
Referring to the goal of monetary union scheduled for 2010, the GCC central bank governors stressed the need for adopting speedy measures to reach the projected target. Al-Sayari disclosed that special joint committees had embarked on a comprehensive study of all issues involved in achieving monetary union. So far they had encountered no obstacles toward the goal of a common currency.
Elaborating on Al-Sayari’s comments on brokerage firms, the Kingdom’s Capital Market Authority (CMA) announced that it is going ahead with regulations for allowing the establishment of brokerage firms.
CMA Chairman Jammaz Al-Suhaimy said: “We hope they will be issued in the next four or five weeks.” The regulations will spell out the requirements for setting up brokerage firms, a move that will break the monopoly of Saudi commercial banks on share trading in the Kingdom.
Al-Suhaimy also said there was a move to bring real estate shares under the supervision of CMA. However, he did not say when such a move would take place. He said CMA is the authority to license real estate investment funds proposed by businessmen.
The central bankers were also in favor of integrating financial services making it easier for Gulf nationals to engage in share transaction across the GCC states. To this end, they called for the licensing of more brokerage firms.
Market sources point out that several major players will make their debut on the stock market next year. The lineup includes a third mobile telephone operator, Saudi Arabian Airlines plus two other private ones, ten new insurance companies, three fast food chains, six family business groups, three investment banking firms, two tour operators, three hospitals, two polyclinic groups, a pharmaceutical chain, and two environmental companies. Together, they represent almost a 50 percent increase over the new stock listings this year.
The conference stressed the need for central banks to play an advisory role in gearing up the GCC capital markets for the challenges posed by the liberalization of the global economy.
Al-Sabah spoke on the need for expeditious measures for integrating the capital market in the GCC. However, he cautioned against any hasty steps to avoid a negative impact. “We have to act within a time frame to achieve optimum result,” he observed.
Al-Swaidy of the UAE central bank supported the call for opening more branches of GCC banks in the Gulf states to facilitate movement of capital in the region. He stressed the need for streamlining the banking regulations in order to promote integration of the Gulf capital markets.
Al-Meraj of the Bahrain Monetary Agency said although merger of the GCC central banks is one of the major goals of the GCC states’ monetary and economic integration, they need to adopt a cautious approach down the road. Any weak links in the chain could make them vulnerable to global competition and defeat the objective behind the goal. “Any changes that we make should be compatible with those that are taking place around the world,” he observed.
