Bank Of England: Establishing Shariâah Compliant Central Bank Liquidity Facilities â Consultation Paper

Today the Bank of England announces the publication of a consultation paper on establishing Shari’ah compliant liquidity facilities.  The paper presents the preliminary findings of the feasibility study it commenced in the second half of 2015, and seeks stakeholders’ views on the options identified.

In October 2013 the Governor stated that the Bank is ‘open for business,’ and a broad range of firms now has access to the Bank’s balance sheet.  However, the Bank recognises that Islamic banks are currently unable to use its existing 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.

Following preliminary analysis, the Bank is now seeking stakeholders’ views on four potential models that could form the basis of future Shari’ah compliant central bank facilities.