But they found it harder to adjust to the post-crisis ‘Basel 3’ liquidity rules, which gave centre stage to the very instruments they were prohibited from holding, including government bonds, such as UK gilts and US Treasuries, and remunerated central bank reserves accounts. To meet this challenge, the Basel liquidity rules give national supervisors discretion to treat sukuk as High Quality Liquid Assets (HQLA), subject to haircuts or other conditions. The consequent increase in demand for sukuk from banks was one factor boosting issuance in recent years. But the proportion of sukuk classed as eligible for regulatory buffers remains relatively modest compared to demand. As a result, while sukuk can provide a reliable medium-term store of value, the relative scarcity of HQLA-eligible stock can give rise to uncertain price movements, especially in stressed markets, reducing the value that is readily realisable, and making it harder for banks to increase their holdings quickly when required. All of this means that Islamic banks can face a somewhat uneven playing field relative to conventional banks when it comes to liquidity management. Unable to use liquid gilts or interestbearing reserves accounts at the Bank of England to meet short-term outgoings, they have tended to hold inefficiently high stocks of cash at zero return, or higher-yielding but somewhat less liquid sukuk. The design and launch of the Bank of England’s Alternative Liquidity Facility That’s where our new Alternative Liquidity Facility (or ‘ALF’) should make a real difference.
We look forward to a productive day and continuing the conversation after the event. Thank you.12 1 From Robin Willner, NYS P-TECH Leaderships Council 2 From Sarah Conte, Per Scholas NY  3/3  BIS central bankers' speeches