FSCS Conventional/Islamic banks

Everyday Islamic Finance Personal and Family Finance
#1

Salaams

  1. If a conventional bank goes out of business, would it be permissable to make use of the Financial Services Compensation Scheme (FSCS) to reclaim the deposit?

  2. Is the FSCS compatible with Islamic banks and the concept of profit sharing? There used to be disclaimers saying that the Shariah board does not consider this to be compatible in the T&C’s but this has been removed (unless I am mistaken) in the past few years, without explanation. Has the thinking changed behind this?

  3. Would it be permissable to make use of the scheme if a halal Roboadvisor, such as Wahed, were to get into problems?

Thanks

#2

Wasalam

May Allah bless you.

  1. If the money is deposited in a bank account for safekeeping and not for investment purpose, then it would be permissible to reclaim through the compensation scheme.

  2. I am not sure why they removed it, but I know in the case of Al Rayan bank, they would make people aware that the scheme was not compatible with shariah. But they have to keep the scheme in place for legal purpose. Best thing would be to contact the bank directly to find out more.

  3. I don’t think it would be permissible. Unless, they have a structure in place which is shariah compliant, that allows you from benefiting from it. @Mufti_Faraz_Adam might have more information on this.

And Allah knows best!