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City Minister Kitty Ussher chairs Islamic Finance Experts Group meeting on feasibility study into Government sukuk

HM TREASURY News Release (89/07) issued by The Government News Network on 16 August 2007

Kitty Ussher, City Minister, today hosted the first meeting of the Islamic Finance Experts Group. The Group was set up to act as an industry sounding board for HM Treasury and the Financial Services Authority (FSA) on Islamic Finance. The focus of today's meeting was the Government's feasiblity study into issuing sovereign sukuk. Speaking after the Islamic Finance meeting, Kitty Ussher, Economic Secretary to the Treasury said:

"The UK is at the forefront of developments in Islamic Finance and London continues to seize new opportunities - two of the largest sukuk issued in the first half of this year were listed in London. "The announcement of the feasibility study into the Government issuing sovereign sukuk has generated a huge amount of interest and enthusiasm. Today, we discussed issuance options and parameters, and potential benefits for the City and retail investors. It was a very informative meeting and we shall continue to listen to a wide range of views before making a decision on whether to issue the first sterling sovereign sukuk."

The Group had a detailed discussion on the feasibility study into the potential issue of sovereign sukuk. The discussion centred on the potential benefits for the City and retail customers of the Government issuing sovereign sukuk. They were informed that the study would take into account the Government's debt management policy, size and nature of potential demand, potential cost and risk characteristics, implications for the Government's financing strategy, experiences of other sukuk issuers; and impact on the markets.

The feasibility study was announced on 23 April and will report on progress at the time of the Pre-Budget Report 2007.

The Group also discussed recent market developments and how the business and Islamic community could continue to work togther in partnership to drive Islamic Finance forward in the UK.

The Government's aims for Islamic Finance are:

* to entrench London's position as a global gateway for Islamic Finance as part of the city competitiveness agenda being pursued by the Chancellor's High Level Group; and

* to create a level playing field for alternative finance and investments, such as Islamic Finance, in the retail market. HM Treasury, the FSA and HM Revenue & Customs (HMRC) will together take forward this agenda and continue their strong and beneficial dialogue with the industry.

NOTES FOR EDITORS

1. On 16 April 2007 Ed Balls, the then Economic Secretary to the Treasury, hosted a High-Level Summit on Islamic Finance. Following the success of the meeting, he announced the establishment of a new consultative forum, the 'Islamic Finance Experts Group' to act as an industry sounding board for the Government and the FSA on Islamic Finance issues going forward.

2. On 23 April 2007, Ed Balls announced that the Debt Management Office and HM Treasury would carry out a feasibility study into opportunities for the Government issuing Islamic financial instruments in the wholesale sterling markets, in consulation with the Islamic Finance Experts Group and reporting at the time of the Pre-Budget Report.

3. Sukuk is an asset-backed, Shariah-compliant trust certificate. The closest instrument comparable in the conventional financial system would be a bond issued in relation to a securitisation.

4. Innovation in financial services is what keeps London and the UK at the forefront of the global financial industry, and this same drive has seen the City take a proactive role in the growth of alternative financial services and tailored products. One of the largest sukuk to date issued by Dubai Ports was written out of the London office of Barclays Capital in January. In March, the UK had the first billion dollar sukuk to be listed on the London Stock Exchange raising £2.5 billion.

5. Increased availability of Islamic Finance products is vital to ensuring the Muslim community in Britain has equal access to business opportunities. Banks such as Lloyds TSB, Royal Bank of Scotland, and HSBC are all offering Shariah compliant products, and London is also the home to a fully Shariah compliant retail bank. Since 2003, the Islamic mortgage market has grown to over half a billion pounds - and has witnessed an increase of about 50 per cent in the last year alone.

6. The Chancellor announced in Budget 2006 a commitment to work with the financial sector to establish the High-Level Group on City Competitiveness, with senior representatives from across the financial sector, to develop and support a new strategy to promote London as the leading international financial centre.

7. At the first High-Level Group meeting, the Government announced its intention to continue to work with the FSA and HMRC to modernise the regulatory and tax framework to ensure that it keeps pace with opportunities in markets of traditional UK strength, such as asset management, along with new and innovative areas such as hedge funds and Islamic Finance. The Islamic Finance Experts Group reports on progress to the High-Level Group.

8. Membership of the Islamic Finance Experts Group comprises:

Members
      Usman Ahmed                 CEO, Global Islamic Banking, Citigroup
      Khursid Ahmed               Chairman, British Muslim Forum
      Amjid Ali                   Head of HSBC Amanah
      Mohammed Amin               PricewaterhouseCoopers LLP
      Mulham Alwani               Managing Director, Head of Middle East
                                  and Islamic Finance,Financial Markets,
                                  Royal Bank of Scotland
      Clive Briault               Managing Director, Financial Services
                                  Authority
      Peter Burnett               Executive Chairman, Middle East, UBS
      Andrew Cahn                 Chief Executive, UK Trade & Investment
      Stella Cox                  Institute of Islamic Banking and
                                  Insurance
      Gerry Deegan                Managing Director, Islamic Bank of
                                  Britain
      Raquel Hughes               Head of Product Management, London Stock
                                  Exchange
      Arul Kandasamy              Head of Islamic Finance Solutions,
                                  Barclays Capital
      Afaq Khan                   Chief Executive, Islamic Finance,
                                  Standard Chartered Bank
      Iqbal Khan                  Muslim Council of Britain
      Sadiq Khan                  Member of Parliament
      Kevin Milne                 Managing Director, International Capital
                                  Markets Association
      Keith Leach                 Head of Alburaq, ABC International Bank
      Miyan Mansur Mannan         Vice-President, Credit Suisse
      Shahid Malik                Member of Parliament
      Neil Miller                 Global Head of Islamic Finance, Norton
                                  Rose
      Yavar Moini                 Executive Director, Morgan Stanley
      Michael Payne               Director, Consumer Banking, Lloyds TSB
      Walid Sarieddine            Director, West LB
      John Stuttard               Lord Mayor, City of London
      John Weguelin               Managing Director, European Islamic
                                  Investment Bank 

9. Non-media enquiries should be addressed to the Treasury's Correspondence and Enquiry Unit on 020 7270 4558, or by e-mail to public.enquiries@hm-treasury.gov.uk.

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