Organisation of the Central Bank of the Gulf Cooperation (Essay Sample)

Report: Organisation of the Central Bank of the Gulf Cooperation Council
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Institution
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Executive Summary
The Central Bank of the GCC is a major venture of the Gulf Cooperation Council. This project would probably end up as one of the top world ventures in the financial sectors all over the world with its main competitor being the European Central Bank (GCC, 2012). With regard to the economic situation currently experienced in the Gulf area, this project report paper seeks to evaluate, assess and give options to the most effective organisation for the proposed project. This is clearly outlined by suggesting a structure that is centralised, providing the argumentation in support of an in house system of organisation and relating GCC’s objectives to the relevance of the proposed organisation. The paper also explains how the structure will help differentiate the Central Bank of GCC from other union banks and especially the European Bank and at the same time portray the crucial objectives and functions of the Bank. Generally, this paper holds the objective to help the management identify the best way possible to serve the Arab states through integration and cooperation so as to strengthen the links between the member states.
Introduction
Background
The Gulf Cooperation Council is a union of several Arab countries founded in May 25th 191 with in Abu Dhabi. The council is based on the Islamic creed which binds six Arabic member states in a common political and economical relationship. These states are United Arab Emirates, Bahrain, Saudi Arabia, Qatar, Kuwait and the Sultanate of Oman (GCC, 2012). One of its major financial venture is the announcement of the Central Bank of the GCC in December 2006 which would act as the monetary union project that would be measured by the common currency of the unions referred to as Khaleeji.
Economical analysis
Despite the fact that the member states records high economical prosperities, the project is prone to high end success but at the same time highly subjected to economical risks like financial crisis hit with less or no chances of quick recovery (Back, 2011). This is evident in the way most of GCC financial projects are presented with disparities. Plans to control such disparities and create projects that set clarified priorities like consumer confidence and business growth involve an effective organisational structure (David & Demand, 2013).
Problem definition
The union deserves a well structured mode of operations and performance to ensure that the several entities of the member states are involved. This structure should in its wide base provide the standards and processes of operation. It should determine the decision making ministries or arms within the union and definitely draw the plan of action for the daily operation of the Central Bank.
Discussion
Critical analysis of the literature provided
According to David & Demand (2013), Organisation of any establishment should include the lines of power, the decision makers and the description of other stake holders from severa functional units of the whole investment. The business professionals suggested that an effective structure picks up the overall complexity of international establishments. It should involve all the vast cultures of employees and consumers who should be unified by the structure in place.
Choice on the structure of the organisation
Placing banking management under a centralised bank is considered a traditional practice in financial control. Nevertheless, bis.org (2012) suggests that the central bank systems conduct the policies of the monetary and financial oversight thus presenting the investment with system stability. Since the six states share most cultural, social and economical beliefs, there is no big gap created as a result of cultural overlap. An in house central banking system will promote the business conduct and customer protection due to the merging of ethos, concerns and culture of the Arabic states of the Gulf region (Back, 2011). The adoption of a centralised organisation structure will help the states achieve their macro-economic objectives by managing the stability of many financial institutions of the GCC and ensuring the smooth operation of the Central Bank. Referring to bis.org (2012), settling on the centralised organisation will generally consider the financial health and the monetary regulation of the union states.
An in house central bank is charged with the responsibility to regulate the stability, payment and systems of other commercial banks. This can only be possible if information transmission is done under one umbrella. Separation of banking systems may promote barriers in the flow of information and make it difficult to quantify the friction caused by the barriers caused (David & Demand, 2013). It is however argued that the ability of the in house organisation to control private banking is next to impossible. This is because of the competitive profit generation obtain by the different states involved that claim the forces in their own country related to economic hits and flow of money.
The existence of a central bank will help the member states quickly correct financial crisis and make decisive plan of actions necessary for the protection of the economic stability of the states and the financial health of other financial institutions (bis.org, 2012).
Similarities and difference from the European Central Bank
The choice of placing the managerial and supervision tasks of the Central Bank of GCC is based on the basis of whether to adopt the central bank in-house supervision or the separate specialised financial institutions that is adopted by the European Central Bank.
Both the Central Bank of GCC and the European Central Bank design their financial objectives to fit several member states that control the economies of such states. As such the Central Bank of GCC can emulate ...