The British government will seek to remove one of the final technical obstacles to the issuance of Islamic bonds, Reuters cited the Treasury as saying today. Islamic finance professionals in the UK, which hosts five stand-alone Islamic banks, were optimistic that if Parliament votes in favour next month to regulate sukuk as bonds rather than investment vehicles, it would encourage the growth of a market that has struggled for traction. If passed, the measure could save issuers of Islamic bonds up to 10,000 pounds ($16,320) a year, a spokesman for the Treasury said. Sukuk are seen as bonds because of their fixed income characteristics but their structure has equity-like qualities, leading to uncertainty over how are treated from a regulatory point of view. Sukuk issuance in the UK has been held up by more fundamental macroeconomic issues, the latest being the debt crisis in Dubai. However, industry insiders said the decision rekindled hopes of corporate issuance. The UK is Europe's most sophisticated Islamic finance hub but so far has only hosted sukuk listings and not had any issuances, either corporate or sovereign. "I think this legislation is definitely a concrete step forward. The characterisation of sukuk as collective investment schemes has plagued the UK, so it is good to see it finally resolved," said a senior industry figure who declined to be identified. Collective investment schemes are liable to application fees, ongoing supervisory fees and internal or third-party costs for compliance. These costs are not applicable to bonds, the Treasury spokesman said. It is a move that we really support and we think is long overdue," said Farmida Bi, a partner at law firm Norton Rose and a specialist in Islamic capital markets. ($1=.6126 Pound)
