BoE consultation and follow up paper

Concluding in May of last year, the Bank of England ran a consultation, on a central liquidity facility that complies with Islamic law. At the BoE webpage, it states:

“As part of its strategy to broaden liquidity provision to the market, the Bank of England commenced work in the second half of 2015 to assess the feasibility of establishing a Shari’ah compliant facility.

The Bank recognises that Islamic banks are currently unable to use the Bank’s existing liquidity facilities. In particular, the Sterling Monetary Framework is the mechanism by which the Bank sets interest rates, and interest-based facilities are not deemed Shari’ah compliant.

The Bank has now issued a follow up paper to the 2016 consultation exercise, which can be accessed at the link below. This paper confirms the Bank’s intention to establish a Shari’ah compliant deposit facility using a fund based model, and provides technical detail on various aspects of implementation. The Bank is seeking views on this paper, and any comments should be e-mailed to: islamic.finance@bankofengland.co.uk by Tuesday 23 May [2017].   

 

 

 

Notes from the initial consultation

  1. Islamic finance refers to activity deemed to be consistent with Islamic commercial jurisprudence. This jurisprudence is in turn informed by the high level principles of Islamic law (‘Shari’ah’). Among these principles are: the Aristotelian notion that money has no intrinsic value and should serve only as a medium of exchange; an emphasis on real economy activity and consequent risk and reward sharing; a prohibition on involvement in what are considered to be socially detrimental activities; and, a prohibition on interest.
  2. The consultation document can be found at: http://www.bankofengland.co.uk/markets/Pages/sterlingoperations/shariah-compliant-facilities.aspx  
  3. The Governor’s speech, given on 24 October 2013, is available at the following link:http://www.bankofengland.co.uk/publications/Pages/speeches/2013/690.aspx 
  4. Deputy Governor Minouche Shafik confirmed in a speech, given on 26 February 2015, that the Bank would commence work to assess the feasibility of establishing Shari’ah compliant facilities in the second half of 2015. The speech is available at the following link: http://www.bankofengland.co.uk/publications/Pages/speeches/2015/801.aspx
Comments are closed.
%d bloggers like this: