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 issued a follow up paper to the 2016 consultation exercise. 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’s 2017 consultation exercise has now closed. Any queries on this initiative, or on the Bank’s work on Islamic finance related matters more generally, should be e-mailed to: islamic.finance@bankofengland.co.uk.
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