Andrew Hauser: Why Islamic finance has an important role to play in supporting the recovery from Covid – and how the Bank of England's new Alternative Liquidity Facility can help

Speech by Mr Andrew Hauser, Executive Director for Markets of the Bank of England, at the Markets UK Islamic Finance Week 2020, London, 2 December 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

It's a privilege to be with you today to talk about the Bank of England's work on Islamic finance – and to announce the launch date for our new Shari'ah compliant non-interest based deposit facility, the first such account from a Western central bank.

The facility, in which deposits from Islamic banks will be backed by a return-generating fund of high quality Shari'ah compliant assets, will further strengthen the United Kingdom's role as the leading international financial centre for Islamic finance outside the Muslim world.

But it also goes deeper – because the core principles1 of Islamic finance are strikingly well suited to responding to some of the biggest challenges we will all face in rebuilding our economy once Covid has passed. Prioritising equity-like risk-sharing over debt. Factoring ethical and environmental considerations into investment decisions.

And embracing innovative financial solutions beyond traditional banking. And that lies four square within the Bank of England's mission to promote the good of the people of the United Kingdom, Muslim and non-Muslim alike.