The structure of the suggested Central Bank for GCC Assignment

The structure of the suggested Central Bank for GCC - Assignment Example Additionally, the Gulf States generate wealth from their vast oil and gas resources that allows their economies to operate above unprecedented development. The empirical research in this study provides information that supports creation of a well-developed financial system. One of the issues captured in this report tends to answer the question on the better options that are required for economic growth within different regions. The GCC region supports bank-oriented financial system that is contrary to market-oriented financial systems supported by the United States and United Kingdom. According to Demirguc-Kunt and Ross (1999), the structure of financial system and overall level of development is crucial for establishment of suggested Central Bank for GCC. However, financial development majorly depends on legal and political institutions. Based on Structure-Conduct-Performance (SCP) model, the study explores implication of structure and conduct on overall performance of suggested GCC financial institution. According to theory of Industrial Organization, structure refers to the extent of concentration of market shares within the market while conduct refers to general behavior of firms measured by efficiency and profitability (Demirguc-Kunt and Ross, 1999). The banking sector is considered one of the major conduit for economic activities within GCC region. Growth of GCC countries is dependent on critical valuation of the structure, conduct as well as performance of banking industry. Monetary union presents an important cornerstone of an economic union based on chosen political power. The structure of the GCC central bank should be based on sound technical basis and at the same time considered a strategic goal (Strum and Siegfried, 2005). A realistic step towards such a goal involves formation of monetary union that ultimately realigns different political systems. In the European case, monetary union was