1.1. The Effect Of The Financial Crisis On The GCC National Economy: The United stated

1300 WordsApr 23, 20196 Pages
1.1. The Effect Of The Financial Crisis On The GCC National Economy: The United stated financial crisis has greatly influenced aspects of the GCC economic and financial market. Generally the crisis leaded to a negative economic development, high unemployment rate across industries. Moreover the crisis has affected the overall liquidity level among GCC countries hence the regulatory bodies took all the measures to impose policies to reduce the negative effect of the crisis on their various sectors however, the policies caused more negative inflation pressures and negative economical outcome. The negative effects were due to the strong relationship between the national economy sectors with financial institutions in which their role…show more content…
Along with that, since inflation rate has reached its highest records 10% to 15% during the same period in some of GCC countries such as Saudi and Qatar, these aspects have caused decrease in development and dropping or cancelling investments to avoid the effects of high inflation rates. 1.2. The Dominance Of The Government To The Banking Sector: “Government ownership and its impact on banks are controversial”. And that comes from a serious fact states that the ownership of GCC banks are dominated mainly by the government, so the banking sector is owned by the local forces that dominate the market. That situation reflects in the limitation of foreign ownership because of the ownership regulations that set by these states; For example, Kuwait and Qatar restricts foreign ownership to 49%, while Saudi Arabia and U.A.E restrict it to 40%. "The share of government and quasi-government ownership in the banking sector in the GCC is substantial"; for example, in UAE, it represents about 50%, 35% in Saudi Arabia, and 13% in Kuwait as what found in study that done before regarding this issue. This issue creates a serious problem about align the interest of managers with those of the shareholders, and what emphasizes that, is what happened between 1980 and 1995. These years associated with an increase in the possibility of banking crises because of high state ownership of banks. 1.3. Governmental

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