Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

Britain carves out exemption for gold clearing banks from Basel III rule

1nvest
Lemon Quarter
Posts: 4323
Joined: May 31st, 2019, 7:55 pm
Has thanked: 680 times
Been thanked: 1316 times

Britain carves out exemption for gold clearing banks from Basel III rule

#426251

Postby 1nvest » July 9th, 2021, 7:24 pm

https://uk.finance.yahoo.com/news/brita ... 39464.html
A British regulator said on Friday that banks clearing gold trades in London could apply for an exemption from tighter capital rules due in January 2022
.
.
The upcoming rules, known as the net stable funding ratio (NSFR), are part of Basel III regulation designed to make banks more stable and prevent a repeat of the financial crisis of 2008-09.

They treat physically traded gold like any other commodity, requiring banks to hold more cash to match their gold exposure as a buffer against adverse price moves.


Back in April 2019 The Bank for International Settlements (central bank of central banks) made gold a Tier 1 asset, the same as US$ - zero risk https://kingdomecon.wordpress.com/2019/ ... plication/

Surely the PRA suggesting that gold requires ANY capital buffer
the Bank of England's Prudential Regulatory Authority (PRA) said on Friday it had "decided to amend its approach to precious metal holdings related to deposit-taking and clearing activities."

It said it had introduced an "interdependent precious metals permission" which would reduce the size of the required capital buffer.

... looks to me like better regulatory alignment, as gold is now Tier 1 within BIS, would occur if the PRA required ZERO capital buffer for gold?

London settles around $30Bn of gold transactions/day
The PRA said it would not classify gold as a high-quality liquid asset, which would have freed other trades such as precious metals loans and leases from the high capital requirement.

The LBMA says gold is liquid enough not to need an additional liquidity buffer for clearing and settlement and short-term transactions.

The PRA, a British regulatory entity surely would only hinder the UK/London as a hub if it were to insist on regulations above/beyond what others might not regulate!

Return to “Mining & Metals”

Who is online

Users browsing this forum: No registered users and 5 guests