The new facility will provide UK Islamic banks (and indeed any other UK banks with formal restrictions on engaging in interest-based activity) with greater flexibility in meeting HQLA requirements, enabling them to hold a reserves-like asset in a non-interest based environment. The ALF will be structured as a wakalah or fund-based facility: a commonly used model in Islamic finance (Chart 4). In simple terms, that means that participant deposits will be backed by a fund of assets, the return from which, net of hedging and operational costs, will be passed back to depositors in lieu of interest. The strengths of this model include its relative simplicity – conceptually and practically – and its flexibility to accommodate future changes in what is a still fast-developing market. The ALF will grow as the UK Islamic bank sector grows. And it will be well placed to exploit the growing diversification of available HQLA-eligible sukuk assets. Over the coming months, we will finalise legal documentation, complete our operational testing and begin the onboarding process for eligible applicants. Firms should expect to commence this work from January 2021. Once operational, the ALF should help put the UK Islamic finance sector on a more level footing with the rest of the market, giving firms here greater flexibility in meeting their liquidity requirements, and helping them to compete with conventional peers while staying true to their founding principles. 18  https://www.bankofengland.co.uk/-/media/boe/files/paper/2016/establishing-shariah-compliant-central-bank-liquidity-facilitiesconsultation.pdf and https://www.bankofengland.co.uk//media/boe/files/paper/2017/sclf_consultationpaper2017.pdf?la=en&hash=E6C1BCEE76AF3812D1985B911E0D29A0DA8A5043.

3  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  Table 2: Islamic finance in the UK – selected timeline 1970's  London market brokers offer wholesale liquidity management using commodities  1982  Swiss-based Dar al Mal al Islami opens London office offering investment management services Establishment of first Islamic bank, Albaraka Bank (ceased 1993)  1983  Establishment of first UK Islamic insurance (takaful) company, Takaful UK Ltd 1996  Islamic mortgages offered in the UK by United Bank of Kuwait (now Ahli United Bank)  2003  HSBC Amanah launches Islamic mortgages and bank accounts in the UK  2004  Authorisation of Al Rayan Bank Plc (formerly Islamic Bank of Britain) Court case of Beximco vs. Shamil Bank of Bahrain establishes principle that secular authorities cannot opine on Shari'ah compliance Bank ABC offers Islamic mortgages under Al Buraq brand  2005  Children's Mutual launches Shari'ah compliant Child Trust Fund Lloyds TSB offers Shari'ah compliant current account  2006  Authorisation of European Islamic Investment Bank Plc (ceased in 2018) First sukuk listed on the London Stock Exchange (Tabreed, $  2007  Authorisation of Bank of London and the Middle East Plc Authorisation of investment firm Amiri Capital (ceased 2018)  2008  FSA outlines regulatory approach to Islamic finance in: "Islamic finance in the UK: regulation and challenges" Authorisation of QIB (UK) Ltd (formerly European Finance House) Authorisation of Gatehouse Bank Plc Authorisation of British Islamic Insurance Holdings/Principle Insurance (ceased 2013) Consultation paper CP08/22 establishes liquid asset buffer requirement for all UK banks  2012  Authorisation of ADIB (UK) Ltd (ceased 2020) HSBC Amanah exits UK market  2013  Authorisation of Cobalt Underwriting London hosts the World Islamic Economic Forum, the first time outside the Muslim world  2014  UK Government issues its first sovereign sukuk Authorisation of Investment firm Arabesque Asset Management TAM Asset Management launches Shari'ah compliant investment funds  2015  Islamic Insurance Association of London established Bank of England commences Shari'ah compliant facilities (SCF) project  2017  Authorisation of Shari'ah compliant crowd funding firm Yielders Columbia Threadneedle Investments launches Shari'ah compliant global equity fund Authorisation of Shari'ah compliant home finance firm Strideup Homes  2018  Al Rayan Bank issues first sterling denominated residential mortgage backed sukuk  2019  Registration of PrimaDollar Factoring, Shari'ah compliant trade finance firm  2020  Authorisation of Investment firm Wahed Invest Registration of several Shari'ah compliant e-money and payment services firms and agents, including: Niyah, Moneemint, Rizq  2021  Planned launch of the Bank of England's Alternative Liquidity Facility (ALF)  Sources: Bank internal analysis and FCA Register  4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  I am proud to say that the Bank of England has been involved throughout those developments.