HM TREASURY News
Release (PN 52/08) issued by The Government News Network on 2 June 2008
Economic Secretary
and City Minister Kitty Ussher MP, today announced the
Government's response to the consultation on a sterling Sukuk
issuance saying the government favoured a 'bill-like'
Sukuk programme which could be fully integrated with the
conventional Treasury bill programme.
Chairing the third meeting of the Islamic Finance Experts Group,
Kitty Usher said that, were the remaining barriers to be
surmountable, a rolling programme of up to around £2 billion of
'bill-like' Sukuk issuance would be achievable over
time. She added that the group will publish a UK strategy paper on
Islamic Finance within the next year.
Speaking today, Kitty Ussher said:
"Today's discussion has emphasised both the importance
of the Islamic finance sector to the City and the
Government's commitment to ensuring the continued growth of
this important sector in the future. The Government is determined
to maintain its momentum on work on Islamic finance and to make
clear to stakeholders its commitment to this industry.
"As such, we want to reiterate our aim to publish a paper
detailing the UK strategy on Islamic finance by the end of 2008.
This paper would clarify the role of the Government in the
development of this sector and importantly, the steps that
industry will need to take to ensure that Islamic finance becomes
one of the UK's success stories."
Responses to the consultation published today have enabled the
Government to move forward in the evaluation of the costs,
benefits and risks associated with a Government sukuk issuance.
The key conclusions from the consultation were presented to the
group for the first time today, stating that:
* the balance of advantages and risks lies with
'bill-like' sukuk rather than 'bond-like' sukuk;
* a rolling programme of up to around £2 billion of bill-like
sukuk issuance would be achievable over time;
* a 'bill-like' sukuk programme would be fully
integrated with the conventional Treasury bill programme, which
has rolling issuance at 1, 3 and 6 month maturities; and
* the Government would use a 'plain vanilla'
Ijara-based structure to facilitate sukuk issuance.
There are still, however, a number of outstanding issues that
need answering before the Government would be in a position to
announce a decision on whether or not it will issue sukuk. The
Government will continue to work to resolve these outstanding
issues and will publish an update of progress in the 2008
Pre-Budget Report.
National Savings and Investments also presented the findings of
their feasibility study of the Government becoming an issuer of
retail Islamic financial products. The full report can be found on
NS&I's website. The study is comprised of the following
four elements:
* Understanding the Sharia'a rules and how these may be used
to develop offers
* Sizing the target market
* Assessing the costs of making these offers
* Identifying risks to both NS&I and the Government
The NS&I feasibility study concluded that it would be
premature for them to offer Sharia'a compliant retail
products at this stage, but that they are eager to maintain
interest in this market and have committed to repeating the
feasibility study once further Government work on sukuk has been completed.
Notes for Editors
1. In the 2007 Pre-Budget Report, the Government announced that
it would hold a further detailed consultation on its feasibility
study on the potential issuance of sterling sukuk. On 14 November
2007, the Government published a consultation paper Government
sterling sukuk issuance: a consultation. http://www.hm-treasury.gov.uk./consultations_and_legislation/sukuk_issuance/consult_sukuk_issuance.cfm
2. The consultation sought views on the advantages, disadvantages
and risks of the Government becoming an issuer of Islamic
financial instruments. It also raised technical questions
including the merits of 'bill-like' and
'bond-like' sukuk and the characteristics that sukuk
would need if they were to be priced at the same level as their
conventional equivalents while ensuring their Sharia'a compliance.
3. Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on
020 7270 4558 or by e-mail
to public.enquiries@hm-treasury.gov.uk
4. This Press Release and other Treasury publications are
available on the HM Treasury website
hm-treasury.gov.uk For
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