Gulf states are planning to unify legislations governing supervision of their banks ahead of the enforcement of their monetary union.
Officials from the six-nation Gulf Co-operation Council (GCC) discussed the plan at talks in Doha on Tuesday and said unification of such legislations is essential before the launching of the monetary union, which is preliminary set for 2010.
The GCC Banking Control and Supervision Committee debated draft common legislations for the banks chalked out two years ago to ensure all banks will be subject to the same rules by their Central Banks and the proposed GCC Central Bank, which is to be created within the monetary union.
"The talks covered a draft legislation for control and supervision of banks in member states," Nassir Al Qaoud, the GCC deputy assistant secretary-general for economist affairs said after the one-day meeting in the Qatari capital.
"These unified legislations will be enforced as part of the monetary union… the GCC banking legislations must be unified before monetary union is launched."
Al Qaoud gave no details of those legislations but bankers said they cover rules issued by the central banks for the commercial bank operating in the GCC countries regarding their capital adequacy, borrowing and lending activities, periodical release of balance sheet, and opening of accounts.
"Another main activity that is expected to be the focus on those unified legislations is the central banks' drive to fight money laundering and their instructions to banks to support that drive," a UAE banker said.
"I think this is a crucial point for the banking sector within the GCC monetary union… it is vital for member states to have a co-ordinated and unified law against suspected funds. I am sure the GCC countries see this a priority."
GCC states have stepped up control of their banks to combat money laundering following reports of a surge in such activity in the region and other countries.
Most of them have issued strict anti-laundering laws, including forcing banks to provide central banks with periodical financial statements and report any suspected transaction.
They have also introduced curbs on large financial transfers to ensure no dirty money would sneak out or into their countries.
"GCC Central Banks are already enforcing effective supervision and control of their banks," Al Qaoud said. "After the creation of the monetary union, the GCC Central Bank will be charged with devising unified rules for auditing and control."
At the end of 2007, the GCC states had 137 banks with combined assets of around $1.1 trillion.