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The Bank of England has launched a consultation with the UK’s Islamic banks on offering shariah-compliant deposit facilities for the country’s retail lenders.

“We recognise that Islamic banks are currently unable to use our existing facilities because they involve interest, which is not deemed shariah compliant”, the BoE said on Thursday.

The central bank first started exploring ways to offer shariah-friendly facilities in 2015, as part of an effort to open up its liquidity tools to a wider range of market participants.

A shariah compliant deposit facility has been prioritised as it is “currently the greatest area of demand”, said the BoE which does not expect it to be established before 2018. The BoE may also expand its efforts to look at Islamic-friendly insurance tools.

Andy Haldane, the BoE’s chief economist, said last week he will be organising “townhall” meetings with the Muslim Council of Britain, alongside other UK organisations, in a bid to capture the public’s thoughts on the broader economy.

The consultation with UK Islamic banks will close on May 23. The BoE’s paper is published here.

Image via Bloomberg

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