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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.

Banks and Banking --- Finance: General --- Islamic Banking and Finance --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Interest Rates: Determination, Term Structure, and Effects --- Financial Markets and the Macroeconomy --- Monetary Policy --- Central Banks and Their Policies --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Other Economic Systems: Public Economics --- Financial Economics --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: General (includes Measurement and Data) --- Portfolio Choice --- Investment Decisions --- Banking --- Finance --- Islamic banking --- Money markets --- Monetary operations --- Islamic finance --- Financial services --- Financial markets --- Central banks --- Liquidity management --- Asset and liability management --- Banks and banking --- Islamic countries --- Money market --- Liquidity --- Economics --- United Arab Emirates