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: email@example.com by Tuesday 23 May.
Following review of consultation feedback and further analysis, the Bank will commence implementation; further updates will be posted on this webpage in due course.
6 April 2017