GRM 2010 Report - Centre of Islamic Studies - University of ...

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Workshop 4: GCC Banking and Financial Sector Dr. Eckart Woertz Gulf Research Center Dr. Hatem Al-Shanfari Sultan Qaboos University The workshop analyzed the different segments of the GCC financial markets and assessed their future development prospects. Additionally, it took a look at foreign investments of GCC countries and their petrodollar recycling via sovereign wealth funds. Special emphasis was laid on the reaction of GCC monetary authorities to the global financial crisis and the policy options they face as they are plan for a GCC monetary union. Based on high oil prices and a more diversified economic structure, the countries of the Gulf Cooperation Council (GCC: Saudi Arabia, UAE, Kuwait, Qatar, Bahrain and Oman) currently have one of the highest GDP growth rates worldwide with a concomitant development of domestic financial markets. A growing population has caused a boom in local real estate and consumer markets and multibillion infrastructure investments are needed. From oil up- and downstream projects to heavy industries, transport, power plants, water desalination and waste treatment there is hardly a sector that does not require an increased amount of financing, financial services and insurance. The worry of monetary authorities in the GCC about high inflation rates has given way to an accommodative stance in the second half of 2008 as the global credit crunch has raised the potential threat of a deflationary contraction. One task of the workshop was therefore the assessment of central bank policies and how a coordinated reaction of the GCC countries to the global financial crisis might help a reformulation of policy options. As possible future developments for the GCC Banking and Finance Sector, the following trends were identified: • Growing investment and corporate banking services for domestic companies and project finance • Increased M & A of GCC companies and increased FDI of foreign companies in the GCC. • Development of capital markets, notably bond and derivative markets, this includes a nascent fund industry ranging from mutual funds to pension schemes and private equity funds. Tackling Gulf Research Meeting – July 2010 55
56 The 2010 Gulf Research Meeting of associated regulatory issues. • Development of private banking services for a growing number of high net worth individuals, who have become more sophisticated. • Advanced asset management solutions for sovereign wealth funds, which manage the increasing oil wealth. Trend towards strategic equity stakes instead of mere portfolio investments. • Venturing of national banks into the project finance market, which is thus far dominated by international banks. • Back office and custodian solutions for GCC capital markets, which have more intersections with international markets and show a tendency towards unification. • Growing role of Islamic banking, although growth rates are likely to level out as we approach a higher statistical base. Potential of local banks acquiring international status via this niche market (e.g. cooperation with Asia/Malaysia). Specific requirements in regulation (Basle II), customer care and risk management solutions. Controversial discussions about Sharia compliance of various products. Workshop Director Profiles Dr. Eckart Woertz Dr. Eckart Woertz served as Director of Economic Studies at the GRC until October 2010. He
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The 2010 Gulf Research Meeting With
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THE GULF RESEARCH CENTER “Knowled
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