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Calling yourself a "bank" does not guarantee that you are a bank

In my opinion Rosette Merchant Bank LLP does not have the key attributes that define a bank.

Posted 6 April 2020

I was very surprised when someone asked me about a UK Islamic bank that I had never heard of before. When I investigated, I concluded that the organisation was not a bank.

I used this for my April column in the magazine Islamic Finance News. You can read it below.

When is a bank not a bank?

Since 2005, I have watched the UK Islamic banking scene very closely, and was heavily involved professionally while at PricewaterhouseCoopers LLP.

Accordingly, when someone recently asked me what I thought about a particular UK Islamic bank, Rosette, I was dismayed to have to confess that I had never heard of it. Was I about to lose any credibility as a guru on UK Islamic banking?

I have since researched it. The bank’s full name is “Rosette Merchant Bank LLP.” The reason why I have never heard of this “Islamic bank” before is very simple. It is not a bank!

Because the UK has very good public registries, finding the information I needed was relatively straightforward, if you know where to look.

On its website which I accessed on 28 March 2020, Rosette describes its business as follows:

“Rosette Merchant Bank LLP is an independent investment advisory and asset management firm specialising in commercial real estate, capital markets, and bespoke family office services.”

This provides the first clue.

In my opinion, the essence of banking is that a bank borrows money from one set of people (depositors) who then have a debt claim against the bank. It lends that money to another set of people (borrowers).

Islamic banks typically also take deposits but for Shariah compliance reasons do not lend money to borrowers. Instead they provide finance to customers normally using transactions which are economically equivalent to lending money.

Rosette does not claim to do that.

On its “About Us” page, Rosette states that “The firm is regulated by the United Kingdom’s Financial Conduct Authority (“FCA”), has a wide range of FCA permissions, and is authorised to act as a UK Alternative Investment Fund Manager (sub-threshold).” However, it does not say what its wide range of FCA permissions are.

I went to the FCA’s public register and saw what I regard as the most important limitation on Rosette’s FCA permissions:

“Client Money: This firm cannot hold client money. It may be able to control client money if it has the necessary requirements.”

If a firm cannot hold client money, obviously there is no way that it can engage in banking business. Rosette Merchant Bank LLP contains the word “Bank” as part of its name, but it is not a bank.

I was curious about Rosette’s results. As an LLP, it is registered at England & Wales’s Companies House, where it must file accounts. The most recent available accounts are for the calendar year 2018. They paint a sorry picture.

Rosette lost £1.9m in 2018 and lost £1.2m in the previous year, 2017. By 31 December 2018 it had lost (cumulatively) £11.8m of its members capital of £12.8m, so its members equity was down to £1m. That does not look sustainable.

The accounts state that Rosette aims to be Shariah compliant at all times. Oddly enough the Rosette website fails to say that, although there is a website page about its Shariah Supervisory Board which currently only has one member.

The website also reports that from 17 February 2020 Rosette is under new management after a management buyout. I look forward to Rosette publishing more details eventually.


If you want to read more, there is a short explanation of what a bank is on the Investopedia website. There is a detailed explanation of what a bank is, and the history of banking, in the Wikipedia article "Bank."

Both of those are of course consistent with the definition of banking that I use above.

Letter to the editor from Rosette Merchant Bank LLP

Following the publication of my column in the 1 April 2020 issue, the following week’s issue contained the letter below, which is reproduced with the permission of the editor of Islamic Finance News.

Readers should decide for themselves regarding the extent to which the Rosette letter responds the points I made in my column.

Letter to Editor: Rosette's response to 'When is a bank not a bank?' column published on the 31st March 2020

“We at Rosette are extremely perplexed by Mr [Mohammed] Amin’s article.

Rosette is very well known to Islamic Finance News, its managing partners and journalists. Rosette has provided extensive paid sponsorship to their recent IFN GCC and UK events, provided speakers for numerous conference panels, had full editorial pieces published about our business and strategy as well as providing numerous and frequent background quotes, comment and content to their journalists. Indeed, the managing director and editor of IFN has confirmed that as a result of various Rosette-focused PR [public relations] activities (some via IFN and other means), that the profile of Rosette and our business activities are very well known indeed.

Rosette Merchant Bank was established some 17 years ago and has been fully authorized and regulated by the FCA [Financial Conduct Authority] since 2004. We regularly review our permissions pursuant to our business activities. Rosette is currently active as an investment manager, successfully acquiring and asset-managing UK real estate for a client base that is predominantly Shariah compliant and based in the GCC. While our historic naming convention may have confused Mr Amin, we encourage anyone interested in our company to call or meet with us first to learn more. We extend that invitation to Mr Amin.

At a time when tens of thousands of people around the world are suffering and dying from the coronavirus, we are shocked and surprised that time has been spent commenting upon our publicly available information. We suggest that these efforts could be better spent elsewhere.

Rosette has the full support of its shareholder and remains committed to safely navigating our clients’ investments through these unprecedented market conditions.”


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