Global law firm Ashurst has advised the Bank of England on the establishment of its Alternative Liquidity Facility (ALF).
The Bank of England opened the ALF on 2 December 2021 and has taken deposits from participating UK-based Islamic banks for the first time.
The ALF is a non-interest-based deposit facility, the first of its kind offered by a Western central bank, designed to provide banks that cannot pay or receive interest with a similar ability to place funds at the Bank of England as conventional banks. This is an important step in providing a level playing field, and enabling greater flexibility in meeting regulatory requirements under Basel III prudential rules.
Under the ALF model, participant deposits are backed by a fund of high quality Shari'ah compliant securities known as sukuk. The return from these instruments, net of operating costs, will be paid to depositors in lieu of interest.
The Ashurst team was led by counsel Conor Funston who advised on Islamic finance matters, working with partner Nick Cheshire who advised on corporate matters with specialist assistance provided by partner Kerion Ball . They were supported by partner Tim Cant and associate Tom Bragg.
Commenting, Conor Funston said "We are delighted to have worked with the Bank of England team on this notable project. The opening of the ALF represents a significant milestone in the development of the UK Islamic finance sector further cementing the UK's position as the pre-eminent centre for Islamic finance outside the Muslim world, in addition to creating a regulatory environment which will support the development and growth of the industry more broadly."
