There is huge potential for an expansion of Islamic offerings in the UK’s financial markets, which will in turn boost London’s position as an international financial centre. The Financial Services Authority (FSA) has today published a paper setting out its role in the development of the UK as the major European financial centre for Islamic financial products and services.
Worldwide, Islamic finance has grown in recent years at a conservative estimate of 10-15% per annum and is worth about £250bn globally. The paper outlines the social and economic reasons, and sets out how regulation has been an important factor, for the growth of Islamic financial products and services in the UK. The paper also identifies some of the challenges and opportunities specific to Islamic finance.
The FSA, the UK financial services regulator, has encouraged this growth by providing an open and flexible regulatory environment, which accommodates both Islamic and non-Islamic financial institutions. It is the first European regulator to authorise a wholly Islamic bank. Other Islamic financial institutions have since been authorised.
The paper also sets out how the FSA has been able to deal with particular issues related to Islamic finance within its existing regulatory framework. For example, retail consumers taking out Ijara mortgages (a type of Islamic home purchase plan) now get the same protection as conventional mortgage customers since the introduction of new regulations in April 2007. There are also a number of international banks which offer Islamic products at their UK branches. Furthermore, several Islamic securities (Sukuk) are now listed in London.
FSA Chairman, Callum McCarthy, said: « Islamic finance is a fast growing force in the world economy and the FSA’s open and principle-based approach to regulation offers the right environment for it to flourish in the UK. There is huge potential for an expansion of Islamic offerings in the UK’s financial markets, which will in turn boost London’s position as an international financial centre.
« We believe in a ‘no obstacles, no special favours’ approach when authorising new financial institutions and welcome the development of this market as it provides certain UK consumers with financial products that are in line with their beliefs. »
The FSA does not regulate the Sharia compliance or otherwise of Islamic financial products.
FSA Media Centre 28 November 2007