U.A.E. Plans Shariah Money Market Entry After Law Change: Islamic Finance - Bloomberg

The United Arab Emirates, the second-largest Gulf economy, may follow Malaysia, Bahrain and Indonesia in selling Islamic securities with maturities of less than 12 months as legislators consider establishing a local debt market, according to Royal Capital PJSC.

Islamic bills would give Shariah-compliant banks more investment options, said Ahmed Talhaoui, Abu Dhabi-based head of portfolio management at Royal Capital, which is 44 percent-owned by United Gulf Bank BSC, an investment bank in Bahrain. The nation’s eight Islamic banks held $49.8 billion of deposits at the end of 2009, or about 19 percent of the total, central bank Governor Sultan bin Nasser al-Suwaidi said at an Islamic banking conference in Singapore on June 14.

Banks that adhere to Shariah principles “are facing a maturity mismatch,” Talhaoui said in an interview this week. “They are keeping a lot of deposits but their options are limited. Some banks are playing a dangerous game, which is essentially to match short-term liabilities with investments in sukuk,” or Islamic bonds, which have longer maturities.