A great way to get gold holders to give up on the idea and buy it up at a sale priceSo, it seems that we understood it backwards - gold isn't going to be valued at 85%, it's going to be valued at 15%. 85% is the value of cash they need to hold in reserve to cover the value of the gold (in case the market/price crashed).
Some suggest it means banks will be increasing gold holdings as it's a now a better asset. Others, as you quoted, suggest it's actually now a worse asset and will lead to banks selling off gold holdings....
So what does the mixed reporting suggest might happen Bug ?
https://www.reuters.com/article/us-gold-regulation-nsfr-idUSKCN1PI12AEuropean finance ministers have rejected a proposal to ease new liquidity rules for banks trading gold, the London Bullion Market Association (LBMA) said.
The industry says the planned rules could force some players out of the market. Due to take effect in the European Union around 2022, they form part of regulations known as Basel III designed to make banks more stable and prevent a repeat of the financial crisis a decade ago.
The rules 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.
The LBMA says they are unnecessary, costly and would disrupt London’s bullion clearing system, which settles gold transactions worth around $23 billion a day.
EU finance ministers rejected a proposal by the European Parliament to lower the percentage used to calculate the liquidity buffer that banks must hold to 50 percent from 85 percent.
Instead, the European Banking Authority (EBA) will examine whether to lower the percentage or exempt precious metals from the buffer, known as the net stable funding ratio (NSFR), the LBMA and the European Council said.
“We are still optimistic,” said the LBMA’s general counsel, Sakhila Mirza. “While we were hoping for that 50 percent, ultimately our aim has always been getting an exemption.”
The LBMA, whose members include major gold refiners and bullion-trading banks, says gold is liquid enough not to need an additional liquidity buffer for clearing and settlement and short-term transactions.
It says the rules could mean a number of banks stop trading or settling gold, curtailing market liquidity. London is one of the world’s biggest bullion markets.
Mirza said the review was likely to last two years. The EBA will then make recommendations which would have to be approved by the European Commission, parliament and council of ministers.
She said the LBMA was preparing to lobby the EBA and that data the LBMA began publishing last year showing for the first time how much gold and silver trades in London each day would help convince the EBA of the need for an exemption.
While Britain plans to leave the European Union this year, the EU’s approach is likely to inform how Britain applies the Basel III requirements.
A European Council official said the EBA had been tasked with reviewing the NSFR requirements for precious metals and did not comment further.
I find myself pondering if it doesnt mean that COMEX aqnd other futures markets would be obliged to hold 15% of the paper contracts as actual metal ?So, it seems that we understood it backwards - gold isn't going to be valued at 85%, it's going to be valued at 15%. 85% is the value of cash they need to hold in reserve to cover the value of the gold (in case the market/price crashed).
https://uk.reuters.com/article/us-m...e-before-metals-closure-filings-idUKKBN22K1Q7U.S. regulators were investigating Bank of Nova Scotia’s (Scotiabank’s) (BNS.TO) metals trading activities several months before it told staff it would wind down the unit, according to its most recent earnings report.
Scotia, one of the most venerable names in the gold trade, told staff in a global call on April 28 that it would wind down its metals business by around the start of 2021, two sources familiar with the matter told Reuters at the time.
The winding down of Scotia’s metals business draws the curtain on what was for years the world’s biggest lender to the physical precious metals industry, with a history stretching to the founding in 1684 of London gold dealer Mocatta Bullion.
Scotia’s senior management had long viewed its metals business as inherently high risk and out of step with its core strategy, six sources familiar with the matter said.
In its heyday a decade ago, ScotiaMocatta, as the unit was known, brought in around $300 million a year, but increasing regulation has required more capital to be put aside to back trading, making it less profitable.
In 2017, Scotia decided to sell the metals business, but failed to find a buyer and instead sharply downsized it.