Four central banks to halt lending next week Emirates Business 24/7

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Four central banks to halt lending next week

Emirates Business 24/7

http://www.zawya.com/story.cfm/sidZAWYA20091227050120/lok050100091227

Emirates Business 24-7, 27 December 2009

Central banks of four Gulf countries will halt their lending operations next week in line with their landmark agreement to launch the world's second major monetary union, a Saudi newspaper reported yesterday.

Saudi Arabia, Kuwait, Qatar and Bahrain, members of the six-nation Gulf Cooperation Council (GCC), will ask their central bank to completely stop lending from the beginning of 2010, when their monetary union is commissioned, Aleqtisadiah, an Arabic language newspaper said.

The move is in line with an agreement by the heads of state of the four signatories at the GCC summit in Kuwait in mid-December.

"The four members will begin at the start of 2010 implementing their summit decision, which bans their central bank from lending," the paper said.

"The agreement also stipulates liquidation of all debt owed to those central banks before the issuance of the single Gulf currency. It also bans those central banks from directly buying securities and other debt instruments issued in the region but they are allowed to buy such instruments from the secondary market."

The UAE and Oman, also GCC members, have pulled out of the monetary union, which those signatories decided to launch gradually in 2010. But officials have said the issuance of a joint currency could take nearly five years. Aleqtisadiah said the four members would focus in 2010 on completing the alignment of their fiscal and monetary policies ahead of the creation of the planned Gulf Central Bank, which will be based in Riyadh.

"These measures also include a mechanism to ensure the full implementation of the ban on lending by their central banks."