Monetary Operations and Islamic Banking in the GCC: Challenges and Options
IMF Working Papers, November 9, 2015
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- Monetary Operations and Islamic Banking in the GCC: Challenges and Options
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Bibliographic details
- Authors: Ritu Basu, Ananthakrishnan Prasad, Sergio L. Rodriguez
- Published: November 9, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513588513.001
Summary findings
- 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.
- Liquidity management has been a long-standing concern in the global Islamic finance industry due to a general lack of Shari’ah compliant instruments that 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 is to support efforts to build Islamic liquid interbank and money markets, which are crucial for monetary policy transmission through the Islamic financial system.
Policy recommendations and options
- Deepen Islamic government securities to enhance availability of high-quality Shari’ah-compliant liquid assets.
- Develop Shari’ah-compliant money market instruments to facilitate liquidity management for Islamic banks.
- Support the creation and deepening of Islamic liquid interbank and money markets to reduce market segmentation and improve monetary policy transmission through the Islamic financial system.
Subject coverage and keywords
- 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