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

28 Pages Posted: 9 Aug 2017

See all articles by Ritu Basu

Ritu Basu

International Monetary Fund (IMF)

A. Prasad

International Monetary Fund (IMF)

Sergio Rodríguez-Apolinar

International Monetary Fund (IMF)

Date Written: November 2015

Abstract

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.

Keywords: Basel Committee on Banking Supervision, Liquidity management, Monetary operations, Monetary policy, Cooperation Council for the Arab States of the Gulf, Islamic banking, Islamic banking;Cooperation Council for the Arab States of the Gulf;Basel Committee on Banking Supervision;Liquidity management;Monetary operations;Monetary policy;Shari'ah-compliant financial instruments;Shari'ah-compliant lender of last resort (S-LOLR);Sukuk, GCC

JEL Classification: E52, E42, E58, E43, E44, E61

Suggested Citation

Basu, Ritu and Prasad, Ananthakrishnan and Rodríguez-Apolinar, Sergio, Monetary Operations and Islamic Banking in the GCC: Challenges and Options (November 2015). IMF Working Paper No. 15/234. Available at SSRN: https://ssrn.com/abstract=3014023

Ritu Basu (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Ananthakrishnan Prasad

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Sergio Rodríguez-Apolinar

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
122
PlumX Metrics