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Cameron Announces U.k. Plans For Debut Issue Of Islamic Gilts

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Prime Minister David Cameron said the U.K. plans to become the first country outside the Muslim world to sell a Shariah-compliant bond as soon as next year.

Cameron laid out his government’s intentions in a speech to the World Islamic Economic Forum in London. The Islamic bonds, known as sukuk, would be valued at about 200 million pounds ($320 million). Cameron also said London Stock Exchange Group Plc (LSE) is creating an Islamic market index.

“For years people have been talking about creating an Islamic bond -- or sukuk -- outside the Islamic world, but it’s never quite happened,” the prime minister said. “Changing that is a question of pragmatism and political will. And here in Britain we have got both. This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond.”

The bond announcement is a reversal from the position that Robert Stheeman, chief executive officer of the U.K.’s Debt Management Office, set out in a Sept. 25 interview. Stheeman said then that offering sukuk was “not going to be value for money” and that something would need to change before Britain would shift its view.

“The government was previously looking at a relatively large program of sukuk issuance as part of its regular financing program, but this has now changed and the strategy is now to look at a more modest sukuk issue in order to derive wider benefits such as instigating activity in the Islamic finance industry,” Steve Whiting, a spokesman for the DMO, said in an e-mailed statement. “By restricting the supply the government also believes it may result in a lower yield than a larger program.”

Islamic bonds are typically backed by assets or cash flow because of the religion’s ban on interest. About 60 percent of the world’s sukuk is issued from Malaysia, according to Malaysia International Islamic Financial Centre.

The lack of highly rated sterling sukuk constrains Islamic lenders in the U.K. because the Bank of England requires them to hold easy-to-sell assets as protection against short-term funding shocks, according to ABC International Bank Plc and Bank of London & the Middle East, or BLME. Islamic finance should be as British as “fish and chips,” London’s lord mayor, Roger Gifford, said at a sukuk summit in June.

Islamic financial assets are growing 17 percent a year and are set to reach $2.67 trillion by 2017, up from $1.21 trillion now, PricewaterhouseCoopers LLP said in a July report.

Challenging Dubai

“Already London is the biggest center for Islamic finance outside the Islamic world,” Cameron said. “Today our ambition is to go further still. Because I don’t just want London to be a great capital of Islamic finance in the western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world.”

The government established an Islamic financial task force in March to bring together policy makers and industry officials to review subjects ranging from banking regulation to standards for Islamic finance education.

Other than those of the Jeddah, Saudi Arabia-based Islamic Development Bank, top-ranked sukuk are sparse. Sovereign Islamic bond issuers include Qatar, which has the third-highest investment grade at Moody’s Investors Service and Standard & Poor’s. Britain had its top-notch credit score cut by one level at Moody’s and Fitch Ratings this year, while it retains a AAA rank at S&P.

Global Islamic bond sales declined this year after reaching a record $47 billion in 2012 as speculation the Federal Reserve will start tapering monetary stimulus pushed up borrowing costs. Sukuk sales have fallen 18 percent to $33 billion this year through Oct. 28, according to data compiled by Bloomberg.

This is so utterly bizarre.

Ok so these Muslims don't want 'interest'... What about criminal bankers flouting the laws of humanity in London? Perhaps we can enjoy a kahlua-snackbar event on a high level scumbag banker after ripping off his Islamic clients?

I wonder what HRH has to say in all this, as she certainly won't be stamping her seal on these?

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From the BBC:

The British government's bonds are likely to make use of property - buildings or land - as the asset into which the investments would go.

Of course, we have nothing else to offer, just land and property.

The return to the investor comes as profit or rent rather than interest.

I've never understood this. Just call interest something else and it's fine. Financial gurus sure know how to bend the rules.

Edited by Eddie_George

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I've never understood this. Just call interest something else and it's fine. Financial gurus sure know how to bend the rules.

That is pretty well whatthese gilts are. Ap product aimed at Muslim investors.

Big deal, nothing to get fussed about. I don't understand why people are so upset about it.

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That is pretty well whatthese gilts are. Ap product aimed at Muslim investors.

Big deal, nothing to get fussed about. I don't understand why people are so upset about it.

Is nothing sacred?

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Are they allowed to profit from a Ponzi?...or is that OK with Allah, praise be upon its Soul?

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I've never understood this. Just call interest something else and it's fine. Financial gurus sure know how to bend the rules.

Indeed

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I'd be interested to see how this actually works before judging it to be a nonsense.

How strict is this Islamic law enforced in Islamic countries? Is there really no profiteering from interest, or is it just called something else and Allah is deemed to be fine with that arrangement?!

Also would be interested to know just what Cameron's banking overlords are hoping to get out of this - must be a nice little earner in it for them somewhere, surely?

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I'm amazed that an all-powerful sky fairy can be fooled so easily just by calling 'interest' something else!

Somebody needs smiting.

Or create a huge universe, survey time and space itself and then lay down rules about peoples house buying arrangements

Edited by aSecureTenant

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Do they create (any of) these bonds out of thin air.

Is that allowed - even if interest isn't?

This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond.”

Does he mean issue it out of thin air - like so many other UK financial products. For sure they'll want that - especially if it's in exchange for oil.

Edited by billybong

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I'd be interested to see how this actually works before judging it to be a nonsense.

How strict is this Islamic law enforced in Islamic countries? Is there really no profiteering from interest, or is it just called something else and Allah is deemed to be fine with that arrangement?!

Also would be interested to know just what Cameron's banking overlords are hoping to get out of this - must be a nice little earner in it for them somewhere, surely?

Islamic finance is nothing new, it's just that the greedy city wants a piece of the action.

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Suk UK ?!

Aptly named for the rentier City of London by their progagandist-in-chief.

The lack of highly rated sterling sukuk constrains Islamic lenders in the U.K. because the Bank of England requires them to hold easy-to-sell assets as protection against short-term funding shocks, according to ABC International Bank Plc and Bank of London & the Middle East, or BLME. Islamic finance should be as British as “fish and chips,” London’s lord mayor, Roger Gifford, said at a sukuk summit in June

This follows on from Carney's speech the other day where he talked about growing London as a global financial centre with more foreign banks.

They're issuing the Suk UK bonds so the Islamic banks can hold them on their balance sheets in London.

Simples.

Edited by R K

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Islamic bonds are typically backed by assets or cash flow because of the religion’s ban on interest. About 60 percent of the world’s sukuk is issued from Malaysia, according to Malaysia International Islamic Financial Centre

Ah, that sounds so out of date - compared to being backed by thin air and fraud.

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Suk UK ?!

Aptly named for the rentier City of London by their progagandist-in-chief.

This follows on from Carney's speech the other day where he talked about growing London as a global financial centre with more foreign banks.

They're issuing the Suk UK bonds so the Islamic banks can hold them on their balance sheets in London.

Simples.

The timing is interesting.

Are they taking this step right now because they need some reliable external banking presence as they're expecting a high risk of another UK banking collapse - another run on UK banks like at Northern Rock.

Maybe due to eu bailins etc.

Edited by billybong

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I'd be interested to see how this actually works before judging it to be a nonsense.

How strict is this Islamic law enforced in Islamic countries? Is there really no profiteering from interest, or is it just called something else and Allah is deemed to be fine with that arrangement?!

Also would be interested to know just what Cameron's banking overlords are hoping to get out of this - must be a nice little earner in it for them somewhere, surely?

They'll be hoping to get a lot of interest!

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The timing is interesting.

Are they taking this step right now because they need some reliable external banking presence as they're expecting a high risk of another UK banking collapse - another run on UK banks like at Northern Rock.

Maybe due to eu bailins etc.

fwiw I think it's simply that their handlers have told them that the future for UK is to expand the bankstering industry in the City of London.

They're going balls out glow ball.

China

MENA

India

The lot.

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fwiw I think it's simply that their handlers have told them that the future for UK is to expand the bankstering industry in the City of London.

They're going balls out glow ball.

China

MENA

India

The lot.

So why right now?

They could have done it years ago. Around year 2000 might have been apt as a new beginning or any time. Isn't the City (and similar bond issuance) already worldwide or at least isn't that what it claims.

This seems to be a relatively small sector or at least so far from the figures quoted

Edited by billybong

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So why right now?

They could have done it years ago. Around year 2000 might have been apt as a new beginning or any time. Isn't the City (and similar bond issuance) already worldwide or at least isn't that what it claims.

This seems to be a relatively small sector or at least so far from the figures quoted

I reckon its all happening now due to the EU attempts to regulate and tax the city and dilute its importance in global finance.

Also from all the cosying up to the arab states, india and china it looks like the govt is making long term moves to maintain the cities relevance as the balance of power and influence moves back to the east.

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