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.
Keywords: Europe, UK, Banking, Islamic Banking, Shari’ah, SCF, BEALF, Alternative Liquidity Facility, BoE
Previous ArticleCBIRC Finalizes Measures for Financial Management Services of Banks
MAS and Temasek jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin, which focused on building a blockchain-based multi-currency payments network prototype.
EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.
BCBS and FSB published a report on supervisory issues associated with benchmark transition.
IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.
ESMA updated the reporting manual on the European Single Electronic Format (ESEF).