UK Government Mulls Offering Sovereign Sukuk

by Philip Morton, Investors Offshore.com

17 August 2007

UK City Minister, Kitty Ussher on Thursday 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 the initial meeting was the Government's feasiblity study into issuing sovereign sukuk. A 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.

Speaking after the meeting, the Economic Secretary to the Treasury observed that:

"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."

She continued:

"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 conducted 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 is set to 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 communities could continue to work togther in partnership to drive Islamic Finance forward in the UK.

The Government's stated 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.

The members of the Islamic Finance Experts Group are:

• 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.

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