The heads of state of the six GCC countries have approved a change in the region's banking rules to allow banks from one member state to operate in another. Delegates at the GCC annual summit in Kuwait, where the decision was announced on 22 December, said that it would only be applied to GCC banks which were set up at least 10 years ago and have shareholders' equity of $100 million. The heads of state also approved a ruling, recently passed by ministers, allowing Gulf International Bank to open branches in all the GCC states (MEED 19:12:97).

At the moment, the banking markets of the Gulf Arab states tend to be dominated by domestic banks, with foreign banks mainly represented through joint ventures. Saudi Arabia and Kuwait, two of the biggest and richest markets, do not allow foreign banks to have a physical presence in their own right while the number of onshore foreign banks in other GCC states is very limited. This also applies to GCC banks themselves. The one exception is the UAE, where 28 GCC and other foreign banks have local branches. The governor of the UAE's central bank has said he does not see any difficulties in opening up the country's banking industry to banks from other GCC countries. 'When it comes to the GCC, our banking system will be competing with similar systems. So, we don't see any problems for our banks from opening up the market to other national GCC banks,' Sultan al-Suweidi told the local Daily Gulf News on 29 December.

More freedom

Bankers say that the GCC governments appear to be giving their banks more freedom to operate within the region as a precursor to opening up to foreign banks in general, as they will be required to do if they join the World Trade Organisation. The new ruling may not have any practical effect for a while, because banks will want time to study its implications. 'The political decision has been made but the framework is not ready yet. We have to know more about the rules, which at the moment are not well- defined,' says a Kuwaiti banker.