By Bernardo Vizcaino
June 13 (Reuters) - The British government has mandatedbanks to arrange a five-year 200 million pound ($336 million)sukuk - the world's first Islamic bond to be issued by a Westernsovereign.
The bond could be issued in the coming weeks, subject tomarket conditions, The Treasury said in a statement late onThursday. This would place the issuance ahead of the Muslim holymonth of Ramadan which starts at the end of June.
A sovereign sukuk is the centrepiece of Prime Minister DavidCameron's bid to position London as a leading hub for Islamicfinance, as competition heats up with financial centres in theMiddle East and Asia.
The bond would be issued before similar transactions plannedby Luxembourg, Hong Kong and South Africa, all keen to diversifytheir funding sources and tap liquidity provided by increasinglywealthy Islamic investors.
In January, Britain appointed HSBC to arrange thedeal and it has now added four more banks to the syndicate:Qatar's Barwa Bank, Malaysia's CIMB, National Bank ofAbu Dhabi and Standard Chartered.
The sukuk will use an ijara structure, a sharia-compliantsale and lease-back contract, allowing the rental income ofthree central government offices to underpin the transaction.
In an ijara sukuk, a party leases equipment, buildings orother facilities to a client for an agreed rental price - apopular format among both sovereign and corporate issuers.
Britain has six full-fledged Islamic banks and over 20institutions in the country that offer sharia-compliantfinancial services, which follow religious principles such as aban on interest and gambling.
A sovereign sukuk could help Britain's Islamic banks to helpmanage their short-term liquidity needs.
In March, The Bank of England said it was studying ways toincrease the number of sharia-compliant assets that Islamicbanks can use in their liquidity buffers, a step towardsreducing concentration risks in the sector.
Britain considered a sovereign sukuk six years ago, but thatissuance never materialised as the Debt Management Officedecided the structure was too expensive at the time.($1 = 0.5956 British pounds) (Editing by Eric Meijer)