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
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.