The Bank of England hopes to provide sharia-compliant banks with access to its balance sheet so they can meet liquidity requirements, in a move that underlines the growing importance of the Islamic finance sector.
Chris Salmon, executive director, markets, at the Bank of England, says there are significant challenges, however. In a speech, he said these include, “designing a sharia-compliant deposit account which has similar economic properties to interest-paying reserve accounts and in identifying sufficient sharia-compliant collateral to support lending facilities”.
Salmon said he hoped to be able to reveal further details by the end of the year.
The UK has sought to play a leading role in Islamic finance so as to underline its position as a major financial centre. In June 2014, the UK government became the first country outside the Islamic world to issue sukuk, Islamic bonds.
According to the International Monetary Fund, there were about $1.8 trillion of Islamic assets worldwide at the end of 2014. Of this, $1.4 trillion is held in the Mena region, says the fund.
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