Monetary Operations and Islamic Banking in the GCC: Challenges and Options

By Ritu Basu, Ananthakrishnan Prasad, Sergio L. Rodriguez

November 9, 2015

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Ritu Basu, Ananthakrishnan Prasad, and Sergio L. Rodriguez Monetary Operations and Islamic Banking in the GCC: Challenges and Options, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The assessment provides evidence of market segmentation across Islamic and conventional banks in the Gulf Cooperation Council (GCC), leading to excess liquidity, and an uneven playing field for Islamic banks that might affect their growth. Liquidiy management has been a long-standing concern in the global Islamic finance industry as there is a general lack of Shari’ah compliant instruments than can serve as high-quality short-term liquid assets. The degree of segmentation and bank behavior varies across countries depending on Shari’ah permissibility and the availability of Shari’ah-compliant instruments. A partial response would be to support efforts to build Islamic liquid interbank and money markets, which are crucial for monetary policy transmission through the Islamic financial system.This can be achieved, to a large extent, by deepening Islamic government securities and developing Shari’ah-compliant money market instruments.

Subject: Asset and liability management, Banking, Central banks, Financial markets, Financial services, Islamic banking, Islamic finance, Liquidity management, Monetary operations, Money markets

Keywords: Asset, Asset share, Bank, Banking assets, Banks ratio, Central bank, Conventional bank, GCC, Global, Islamic Banking, Islamic finance, Liquid asset, Liquidity management, Market, Monetary Operations, Money markets, Omani bank, Participation paper, Return on assets, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/234
Stock No:

WPIEA2015234
ISBN:

9781513588513
ISSN:

1018-5941

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