Structure of the suggested Central Bank for GCC and How might this Assignment

Structure of the suggested Central Bank for GCC and How might this bank be similar or different from the European Central Bank - Assignment Example They would only majorly borrow traits from systems like that of the EU central Banking system. Formulation of the likely structure is therefore of fundamental and of primary concern and ensuring that the structure is the most suitable and applicable is paramount. Proper systems would ensure that the costs of banking within the region are highly regulated and that tight controls are ensured of money and money operations. Introduction Our main task in this assignment is to discuss the likely structure of the suggested GCC Central Bank. We are also required to its similarity and differences with the European Central Bank. Furthermore, we have to find the arguments supporting and those against such a system and most importantly the objectives of the system. The GCC central bank has the main aim of bringing together the operations of the 5 central banks within the U.A.E in a regulatory manner. It would therefore be modeled in a closed system of financial accounts; this means that the equi librium volume of banks intermediation between the households and corporate would show structural measures like preferences to households, cost structures, loan demand by corporate (Cobham & Dibeh 2011). Inclusive in the structure would be the integration of the differences in borrowing and deposit rates of the central banks of the five countries (Grauwe & Dewachter 1999). The structure also is inclusive of the width of the central bank standing facilities corridor as well as the stance of the monetary policy. This is to enable the system be in the position of cushioning the U.A.E against any form of financial crisis (Rajan & Zingales 1998). The banking systems of the GCC countries is mostly dominated by a very small number of both domestic and foreign commercial banks making any dealing involving finances to be quite of an uphill task. This system is designed in manner to help provide better and more information to enhance decision making hence enhance the efficiency of the U.A.E e conomy in terms of resource allocation hence general improvement of welfare (Hamori & Hamori 2010). It has a monetary policy unit mandated with the task of designing monetary policy for the promotion of price stability, sustainable economic growth and a stable financial system within the UAE. Policies established have the impact of reducing by a wider margin a level of uncertainty and the established monetary policy unit is expected to reduce the noise because of policy makers in an economic environment (Levine & Renelt 1992). The proposed GCC central bank is formulated by an act prepared by the 5 member countries. This is due to the desire of the countries to form one central bank body for the sake of uniformity in the monetary and fiscal policies governing their financial systems. The Acts confers the GCC central bank with the responsibilities of formulating monetary policy, ensuring price stability, issuing a common currency and performing any other functions conferred to it by t he Act (Rajan & Zingales 1998). It has a central head office with branches located in each of the countries that have come together to form this form of financial organization. The system will also run currency centers in specified locations within the UAE region. The suggested arrangement will have assistant governors to support the activities and decisions by a central governor (Smits 1997). The directors will still be there with the governor at the head office to help in the daily