Sunday, 2 December 2012

Gold as a Tier 1 Bank Asset - Sprott

There has been discussion for some time around gold's potential to re-enter the monetary system with an increased weighting on bank balance sheets if "Basel III" / BIS rulings change the risk weightings to be applied. Sprott makes clear there is still much to be confirmed.

I first posted about this in May and June 
There are now a number of newsletters suggesting that this could be a significant driver of the gold price in 2013.

Here a paper by Eric Sprott and David Baker gives some more detailed consideration to the possibility but also makes clear in the appendix that this is not yet a "done deal".
Clearly Sprott's position is very bullish on precious metals, silver even more than gold.

We have discovered in delving further that gold’s treatment in Basel III is far more complicated than the rumours suggest, and is still, for all intents and purposes, very much undecided. Without burdening our readers with the turgid details, it turns out that the reference to gold as a “zero-percent risk-weighted item” only relates to its treatment in specific Basel III regulation related to the liquidity of bank assets vs. its liabilities. (For a more comprehensive explanation of Basel III’s treatment of gold, please see the Appendix). But what the Basel III proposals do confirm is the regulators’ desire for banks to improve their liquidity position by holding a larger amount of “high-quality”, liquid assets in order to improve their overall solvency in the event of another crisis.

1 comment:

  1. Greetings! I am curious about one thing, could you please tell us your place of origin?