The Bank of England launched a consultation on the establishment of a Shariah-compliant deposit facility using a fund-based model.

The central bank noted that Islamic banks are unable to use its existing facilities as they involve interest, which is not deemed compliant with Shariah law. It started work to develop a Shariah-compliant facility in the second half of 2015 as part of efforts to broaden market access to central bank liquidity facilities and focused on setting up a deposit facility, which saw "the greatest demand."

The BoE said it may start work on an accompanying Shariah-compliant liquidity insurance facility once the deposit facility is operational and fully evaluated. However, the deposit facility is unlikely to be ready before the spring of 2018.

The deadline for responses is May 23.