Bank of England’s Establishment of Alternative Liquidity Facility

In UK Ashurst, advised on the matter.

Ashurst advised Bank of England with a team including Kerion Ball (Debt Capital Markets), Nick Cheshire (Picture – Debt Capital Markets), Tim Cant (Finance).

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 (Picture) who advised on corporate matters with specialist assistance provided by partner Kerion Ball . They were supported by partner Tim Cant and associate Tom Bragg.

Involved fees earner: Kerion Ball – Ashurst; Tom Bragg – Ashurst; Tim Cant – Ashurst; Nick Cheshire – Ashurst;

Law Firms: Ashurst;

Clients: Bank of England;

Author: Giulia Di Palma