LONDON, 6 August 2007 — Another sign of the emerging importance of London as an international Islamic finance is the authorization of the latest Islamic bank in the UK, the Bank of London and the Middle East (BLME), which got its license from the UK’s Financial Services Authority (FSA) in July 2007.

BLME is promoted by a consortium of Kuwaiti Islamic financial institutions and entities, led by Boubyan Bank with 20 percent of the equity; the Kuwait Public Fund for Social Security with 10 percent of the equity; and including others such as Aref Investment Group and its subsidiary International Leasing Company (ILIC).

Kuwait’s Securities House Group still with the FSA including ones from Europe Finance House promoted by Qatar Islamic Bank and Al-Bait Bank promotes at least two other license applications for Islamic banks. The former will concentrate on consumer and investment banking and the latter purely on investment and corporate banking; and debt and capital markets products such as sukuk structuring.

“We have submitted an application for a license to the Financial Services Authority (FSA) in London. The bank will be called European Finance House (EFH) and we hope we can get the authorization before the end of this year,” confirmed Salah Jaidah, CEO of Qatar Islamic Bank to Arab News. “The main thrust of EFH would be to cater for Islamic financial institutions. We believe that these institutions when they look toward Europe they enter the markets with conventional institutions or on their own. We at EFH plan to give them an alternative solution to invest their surplus liquidity. Having a strong financial institution such as QIB supporting it, will give EFH and easy entry into the market. Some people are under the misconception that we are merely trying to cater for the UK’s 2 million Muslim population. Yes, they will be a target for us. But we are also interested in getting business from the wider market including convincing companies, for instance, of the business case to switch from conventional finance to Islamic finance. As such, we are trying to take some of the surplus Islamic money and to employ it in an alternative risk in European Grade-A transactions.”

The BLME on the other hand plans to provide a range of “high quality” Shariah-compliant banking services and advice to businesses both in Europe and the MENA region. BLME, which is capitalized at 175 million pounds, plans to focus on liquidity management products; corporate banking; private banking and investment management; and investment banking.

According to BLME’s inaugural CEO, Humphrey Percy, who has more than 30 years experience in banking including with Barclays Capital, “BLME is coming to the market at a time when Islamic finance in the UK has passed the initial stage and is now entering a solid growth state. We are confident that the timing of our entry into the market, combined with our level of capitalization and the high quality institutional backing will ensure success in this fast growing market.” Other management appointments include Richard Williams as finance director and Natalie Schoon as head of product management.

Yacob Al-Muzaini, chairman of BLME and chairman and managing director of Boubyan Bank, is confident that BLME has an important role to play in the growing Islamic finance market in the UK and European Union. “London is already one of the largest centers for Islamic finance outside the Muslim world and we are delighted to be involved in developing this innovative and impressive UK offering. It is crucial that businesses and individuals seeking Shariah-compliant financing and investment products have a choice in the range of financial services they are offered without having to compromise on either service or Islamic principles,” he stressed.

Meanwhile, Arab Banking Corporation’s London-based subsidiary ABCIB Islamic Asset Management has announced the successful sale of its Al-Bait UK Real Estate Fund. The fund, which comprised a portfolio of office, mixed-use and industrial assets in diversified locations in the UK acquired in 2003, was sold for 58.8 million pounds to the Pan-European Islamic Real Estate Fund.

The early exit, says Derek West of CEO of Islamic asset management, a wholly owned subsidiary of ABC International Bank in London, has generated profits significantly in excess of targeted returns. The Al-Bait Fund’s annual internal rate of return on distribution is 15 percent, which is equivalent to a gross return on invested equity of around 50 percent.