BoE to Establish A Liquidity Facility That Complies With Shari’ah
Dave Ramsden, Deputy Governor, Markets and Banking, announced that BoE will establish a subsidiary to house the Shari’ah-compliant facility (SCF). The SCF, once launched, will allow UK Islamic banks to hold sterling deposits at BoE for the first time. The SCF will provide Islamic banks with greater flexibility in meeting Basel III liquidity requirements, putting them on a more level playing field with conventional banks, which can already place deposits at the central bank.
Conventional banks can already hold reserve accounts at BoE; therefore, the SCF is an important development in enabling Islamic banks to do the same, providing them with greater flexibility to meet Basel III liquidity rules. The SCF will also be the first non-interest-based liquidity facility to be offered by a major Western central bank, providing important structural support to the Islamic finance sector in UK and further strengthening the position of UK as an international financial center. Details of how the SCF will operate in practice can be found in the BoE consultation paper, which was published in February 2016, on establishing Shari’ah compliant central bank liquidity facilities.
At its September meeting, Court of Directors of BoE agreed that the subsidiary will take the form of a special purpose vehicle (SPV), called the Bank of England Alternative Liquidity Facility (BEALF). BEALF will be formally incorporated shortly and will be a wholly owned subsidiary of BoE. Members of the senior management of BoE will be appointed as its Directors. Further work remains before the SCF can be launched, but the incorporation of BEALF marks an important milestone for this medium-term project. BoE will make further operational announcements regarding the facility in due course.
Related Links
Keywords: Europe, UK, Banking, Islamic Banking, Shari’ah, SCF, BEALF, Alternative Liquidity Facility, BoE
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
CBIRC Finalizes Measures for Financial Management Services of BanksRelated Articles
EC Delegated Regulation on Specialized Lending Exposures Under CRR
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI Consults on Minimum Qualifying Rate for Uninsured Mortgages
OSFI is proposing new minimum qualifying rate for uninsured mortgages under the Guideline B-20.
ECB Updates List of Supervised Entities in EU in April 2021
ECB updated the list of supervised entities in EU, with the number of significant supervised entities amounting to 115 as of the March 01, 2021 cut-off date.
OSFI Issues Letter on ICAAP Submission and Internal Audit of BCAR
OSFI issued a letter to confirm that a formal Internal Capital Adequacy Assessment Process (ICAAP) submission is not required in 2021.
EC Agrees to Prolong Scheme to Support NPL Reduction at Greek Banks
EC has approved the prolongation of an existing Greek scheme aiming to support the reduction of nonperforming loans, or NPLs, of Greek banks on the basis that it remains free of any State aid.
EIOPA Study Examines Internal Model Market and Credit Risks Under SII
EIOPA published a report presenting the results of its yearly study on the internal modeling of market and credit risks under the Solvency II Directive, also known as SII.
ESMA Issues Notification Templates for STS Synthetic Securitizations
ESMA published the interim simple, transparent, and standardized (STS) notification templates for synthetic securitizations, post the recent amendments to the Securitization Regulation.
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
EBA Updates Lists of Entities for Use in Capital Calculations under SA
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
FED Proposes to Automate Bank Stock Adjustment Using Call Report Data
FED published a proposal to automate non-merger-related adjustments to member banks' subscriptions to Federal Reserve Bank capital stock.
