IslamicFinance.de

There is little escape from the volatility that the Brexit vote has wreaked. Islamic banks' partiality for UK real estate could be particularly painful if property prices fall, as they are predicted to, by as much as 10%. Islamic banks' overreliance on the property sector is well documented, and Britain has long been a favourite destination for real estate investment. The biggest issue facing the UK financial services sector is whether institutions will retain their passporting rights. There is much at stake for Britain too. Islamic finance plays a significant role in infrastructure development in the UK, from The Shard to the Olympic Village. Over 6500 homes are currently being financed by a GBP 700 million investment by Gatehouse Bank. The UK cannot afford to lose this funding, especially when investment from Europe dries up.

In 2008 the #Qatar owned Project Blue entered into an arrangement to acquire the former Chelsea Barracks in West London from the Ministry of Defence for £959 million. Monies were advanced by Masraf al Rayan Bank using an ijara arrangement for the transaction. Now the Court of Appeal has found that the Revenue and Customs authority should have sought Stamp Duty Land Tax from the bank rather than the purchaser, but was apparently out of time to raise such an assessment. Eventually, the machinery in the Finance Act 2003 was not up to the task of ensuring an ijara was treated for tax purposes in the same way as any other transaction. As the adoption of Islamic Finance instruments increases, British tribunals, courts and regulators will need to understand the structures more clearly.

On a pure investment basis, London has a transparent property market. Property tenure is clear cut and underpinned by the legal system. There has long been a trend for overseas buyers to purchase homes or investment properties in central London. Over the past few years, Russian and Asian buyers have become more active, but the interest from the Middle East has never waned. While the Qatar Investment Authority (QIA) Wealth Fund has been diversifying its portfolio away from Europe, it still has at least $7 billion directly invested in equities traded on the London Stock Exchange, in which it also holds a 10.3% stake.

The small European nation of Luxembourg is expected to threaten and take over London’s role as European hub for Islamic finance in a post-Brexit world. The big hit the UK is suffering politically and economically by the June 23 "Leave" vote will result in years of uncertainty and the risk of thousands of job cuts or relocations to mainland Europe. Over the past years Islamic finance has gained a strong foothold in London which served as a gateway for Arab investors to Europe. Now that the UK voted to quit the European Union, an exodus of investors is expected as they fear tighter regulations and higher taxes looming.
As an alternative, Luxembourg has shown readiness for innovation and will continue to improve its competitiveness. Luxembourg was the first European country that joined the International Islamic Liquidity Management Corp (IILM). In September 2014, Luxembourg also issued the first sovereign sukuk in the eurozone and is soon expected to host its first fully-fledged Islamic bank on its territory.

Where UK based students are led to take Islamic finance masters' degrees as a route to an Islamic finance career, mis-selling may be taking place. In world rankings, many UK universities rank relatively highly, and such a UK degree can enhance the promotion prospects of foreign students in their home country. However, many UK origin students are persuaded to take a master's degree in Islamic finance immediately after graduating. Unfortunately, the number of available positions in Islamic finance in the UK is very limited. Also UK Islamic financial institutions are too small to train people, and typically only hire experienced Islamic bankers.

Sharia student loans will be set up for the first time in Britain as part of a drive to boost the number of young Muslims applying to university. The government vowed to tackle the issue by creating a Takaful model, which is Sharia-compliant. Although no interest would be charged, the government said that repayments would be structured so that the total paid back would be the same as that paid by a student with a regular loan.

Iran's Bank Mellat seeks to file a claim of at least 500 million pounds (USD 820 million) in compensation against the British government for loss of business caused by illegal sanctions on Tehran over its nuclear energy program. It is the first time that an Iranian lawsuit over sanctions has reached the stage of claiming compensation. On June 19, 2013, Britain’s Supreme Court overturned a ruling against Bank Mellat over its alleged links to Tehran's nuclear energy program. The European Union General Court decided in January to quash sanctions imposed against Bank Mellat in July 2010.

The indebted Kuwaiti shareholder of British luxury carmaker Aston Martin has persuaded just under a third of its creditors to accept a debt restructuring deal that offers them shares in a portfolio of its assets. The sharia-compliant investor defaulted on a $100 million Islamic bond payment in 2009, leading it to restructure around $3.7 billion in debt two years later. Under the new deal which was accepted by 29% of Investment Dar's creditors, they settled claims at a 62.6 percent discount in exchange for cash, debt and equity held by a vehicle based in Jersey. In May, Investment Dar said creditors which did not want to take part in the offer could retain their claims under an original restructuring plan, which offered creditors a 10 percent stake.

Banks should not be afraid to go further and faster in their adoption of cloud computing, according to Mohamed Gamil, chief operating officer at Islamic Bank of Britain. IBB currently has a deal with US cloud computing company Salesforce.com. Gamil said that the adoption of the cloud means that he is free to experiment with new ideas without spending millions of pounds up front. Islamic Bank of Britain originally turned to cloud computing for customer relationship management. It then decided to move sales management, customer on-boarding for current accounts and savings into the cloud. Finally in July 2013, Islamic mortgage alternatives were added to the cloud. The cloud idea is especially interesting for small banks which have to compete with the big players that spend hundreds of millions of pounds on IT every year.

The Islamic Bank of Britain has launched a pair of new home finance deals. The IBB will now offer a 2-year fixed rental rate Home Purchase Plan at 3.79% and a discounted variable rental rate HPP at 3.59%. Both plans are available to consumers with a deposit of 35%. According to Imran Pasha, head of sales and service at IBB, this is the first time IBB has offered home finance to consumers with a 35% deposit. The launch will benefit home buyers with a larger deposit, existing homeowners looking at re-financing deals or those seeking to release some equity from their property.

Three million muslims live in Britain, and more and more of them are demanding financial products compatible with their faith. British business leaders are eager to cash in on this expanding revenue stream.David Slater and his colleagues of London and Partners, backed by the British government, are now pushing for London to become the global hub for Islamic finance and they’ll be pressing their case at the 9th World Islamic Economic Fórum which will be hosted by London in October. The U.K. already has the largest Islamic banking sector outside the Middle East and Asia. Britain has also changed its commercial and taxation laws to accommodate sharia-compliant finance. More sukuk have been issued on the London Stock Exchange than any other bourse, worth more than $34 billion.

The Islamic Bank of Britain (IBB) launches a rent only plan, that means a variable rental rate product which is available to landlords of any faith with a deposit of 35 per cent and at a rental rate of 5.49 per cent. The plan offers financing between £30,000 and £500,000 on a minimum property value of £90,000. According to IBB head of sales and services Imran Pasha, there is a growing demand from landlords for Sharia compliant property finance.

The Italian private equity fund Investindustrial bought a 37.5 percent stake of Aston Martin. The deal was financed via a capital increase agreed with majority Kuwaiti owner Investment Dar. According to the carmaker's CEO Ulrich Bez the transaction will bring money for the next generation of products from 2015 to 2025, as well as know-how and experience. Investindustrial plans to expand Aston's model range and to strengthen its global dealership network.

The deadline for Qatari lender Masraf Al Rayan to come up with an offer for Islamic Bank of Britain (IBB) concerning its takeover has been extended. It initially lapsed on December 10th and was now extended to January 7th. IBB is majority-owned by Qatar International Islamic Bank. The latter has been discussing selling a controlling stake in the British bank with Masraf Al Rayan since June 2012.
According to a statement by IBB, its lending growth for the first nine months of 2012 have been driven by two new home financing plans. Furthermore, the bank will search for ways to offer more products.

HSBC will have to pay $1.9bn to US regulators after admitting its faults. The money-laundering probe of the bank focuses on the transfer of billions of dollars on behalf of nations under international sanctions such as Iran. Also, through the US financial system, money from from Mexican drug cartels was transferred. HSBC admitted its control was not strong enough and made an apology in a statement. The bank further announced that it had reached a deferred-prosecution agreement with the US Department of Justice.

The Islamic Bank of Britain will bring about a savings account with a rarely high rate - 4%. The new account has a fixed rate for two years. The deposited money will be used to support Sharia-compliant and ethical trading companies.

The Islamic Bank of Britain offers a two-year fixed account with an expected profit rate of 4pc. People of any faith can take advantage of this table-topping offer. Since the bank's investments go to Sharia compliant and ethical trading activities, the 4pc are not paid as interest but offered as an 'expected profit rate'. This account rate os only available from July 21 until August 19.