London's financial regulator, the Financial Services Authority (FSA), hosted a meeting with prominent members of the Islamic financial community on 8 September, to discuss the issue of operating licences for Islamic banks.

'There is nothing in the banking act that prevents an Islamic bank having a licence,' says Kate Burns, an FSA official present at the meeting. 'Some areas might be problematic, such as the function of risk-bearing deposits and the role of the sharia committee within the management framework, but there is no reason why these issues can't be resolved.' Such positive comments signal a change of direction by London regulators who, in the past, have said these two particular issues were insurmountable.

She says that progress has been made with advances in accountancy standards and transparency. 'The real issue is that no one has applied for a licence and until they do many of the subjective aspects of the procedure remain unexamined. We have a set of minimum criteria but the issuance of the licences is not a tick-box system that can be worked out in advance,' says Burns.

'The meeting was very amicable and a lot of progress was made,' says Nasr-Eldin Ayoub-Bey of the London-based Institute of Islamic Banking & Insurance (IIBI), who attended the meeting. 'It seems that the FSA wants to be innovative. There are currently no proper Islamic banks licensed under Western jurisdiction, and London wants to be the home of innovative financial products. We are hopeful of more progress in the future.'

The delegation of Islamic bankerscomprised Duncan Smith, head of United Bank of Kuwait's Islamic Investment Banking Unit, Iqbal Khan, head of the Islamic banking unit at HSBC, Mahmoud al-Helw, president and chief executive officer of Geneva-based Faysal Finance, Muazzam Ali and Ayoub-Bey of the IIBI and Khurshid Ahmed, a senior economist from the Islamic Foundation.