The GCC Monetary Union Agreement
The GCC Monetary Union Agreement was approved in June 2009 and entered into force in February 2010, following completion of ratifications procedures and gaining the status of an international treaty. The Monetary Union Agreement consists of 28 Articles divided into six Chapters. The first chapter deals with the establishment of the monetary union and its characteristics and key features. The chapter also deals with the tasks and joint economic action steps to complete the establishment of monetary union and the issuance of the common currency. The second chapter addresses the establishment of the Gulf Monetary Council (GMCO) through specifying its legal & institutional framework and locating its headquarters. The third chapter touches upon the assigned tasks to GMCO and specify its role in issuing the common currency. The fourth chapter deals with the establishment of the central bank and defining its objectives and functions, stressing its autonomy. The fifth chapter sets the principals and rules of cooperation between the central bank and the member states, and describes how it will practice its functions and carry out its mandate. The sixth chapter deal with final provisions such as privileges, immunities, settlement of disputes, amendment and accession of any other GCC state to the agreement.
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Gulf Monetary Council Statute
The statute document was approved following the Monetary Union Agreement and it became effective in March 2010. The statute consists of 20 Articles. The first three Articles deal with definitions, establishment of GMCO and its headquarters, apart from the layout of GMCO's legal and institutional framework. The Article (4) describes the objectives and mandate of GMCO, the foremost of which are the coordination of monetary policies, defining the legal and institutional framework of the Central Bank and preparation for the issuance of common currency. In light of this, GMCO will set a timetable for issuing the common currency and its introduction to circulation. The Articles (6-13) deal with the membership to GMCO and its bodies. It also describes the mandate of GMCO in addition to the mechanism and procedures of the executive body. The remaining Articles (14-20) deal with preparing the annual budget and final account, termination procedures, and replacing it by the central bank as well as other final provisions such as privileges, immunities and amendment procedures.
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The Headquarters Agreement of Gulf Monetary Council
The Headquarters Agreement between the Kingdom of Saudi Arabia and GMCO was approved in April 2013, and it consists of nineteen Articles. The first three articles deal with definitions, GMCO's headquarters and its legal personality. Article 4 defines necessary privileges and immunities to achieve GMCO's objectives and carry out its tasks in accordance with GCC Privileges and Immunities Agreement. Articles (6-14) deal with organizing the principles of relationship between GMCO and host country in accordance with its statute, in a manner that would facilitate the pursuit of GMCO's functions and tasks. These Articles also describe the obligations and responsibilities of the host country towards hosting the council. The remaining Articles (15-20) deal with final provisions such as dispute settlement, amendment and procedures to replace GMCO by the central bank as well as representation of the host country in the agreement and its entry into force.
Economic Agreement of 2001
The Economic Agreement approved at the summit of GCC Supreme Council (Muscat, December 2001) represents the core of the monetary integration program and the basic reference, which draws down the plan for joint economic action as well as the phases of integration and economic cooperation in the field of monetary integration among the GCC countries. Article (4) of the Third Chapter provides for the establishment of a monetary union and completion of necessary requirements of joint economic action among the member states in accordance with a specified timetable.
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Document of Guidance Standards for Unified Banking Supervision of the GCC Countries
This document, which was approved by the GCC Governors Committee in 2013, includes provisions reflecting the necessary requirements for the unification of monitoring and supervision practices over banking system in the GCC Countries. For instance, provisions related to the license requirements for conduct of banking business (third chapter), minimum prudential requirements (fourth chapter), supervisory powers assigned to national authorities (fifth chapter), management of crises and systematic risks (sixth chapter) and compliance (seventh chapter). In addition, Annex 1 on guidelines set by the Governors Committee for the purpose of Banking Supervision, and Annex 2 on the timetable for application of Basel III standards.
Economic Convergence Criteria
At its 73rd meeting held in May 2007, the Financial and Economic Cooperation Committee together with the Governors committee approved the economic convergence criteria required for successful of Monetary Union and issuance of common currency, which was authorized by the GCC Supreme Council's at its 26th Session (Abu Dhabi December 2005). The criteria include inflation rates, interest rates, reserves adequacy of monetary authority, annual deficit in government finance to GDP ratio and public debt to GDP ratio.
Agreement of the Linking System for Payments Systems between the GCC Countries
The GCC Supreme Council, in its forty-first session, which was held in Al-Ula Governorate, approved the agreement of linking system for payments systems in GCC countries. The agreement of common payments system consists of fourteen articles, where the first three articles deal with definitions and objectives in addition to general provisions such as settlement currencies included in cross-border settlement between GCC countries, joining the payments system, and conditions related to alternative procedures. The second article sets out the objectives of the common payments system, of which the establishment of a unified payment system to settle financial transactions in real time between the GCC countries is in the forefront of objectives, followed by the development and integration of the regional financial infrastructure system, the adoption of regulatory and supervisory frameworks, and other objectives mentioned in the agreement referred to. Articles (4-6) deal with the mandate of the Governors Committee and the role of national central banks, where the articles of the agreement state the functions of the Governors Committee and the national central banks, as well as the mechanism of operating and managing the payment system and the required rules and procedures to do so in addition to the supervisory tasks assigned to the central banks in this area. Article (6) also stipulates that the settlement transactions will be final and forced. As for the rest of the articles (8-14), they deal with information confidentiality, immunity and exemptions, in addition to final provisions such as withdrawal from the agreement or termination of the membership of a party, in addition to dispute settlements, making amendments to the agreement and entry into force.
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