swissaustrian
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Delay of Basel III implemt. forces Swiss banks to go phyiscal?
This is going to be a quite technical post, sorry for that.
As previously discussed ( http://www.pmbug.com/forum/f2/gold-considered-tier-1-status-1056/ ) , Basel III would make gold Tier1 capital (low risk), therefore increasing incentives for banks to hold physical gold (the article below gets that wrong). The implementation of Basel III has been delayed for several years, probably due to lobbying by the megabanks. Switzerland has imposed even tighter capital rules on her own, but they don't say anything about gold.
This takes us to the following FT article which states that the Swiss megabanks UBS and CS are trying to make their clients to change UNallocated gold (and silver) accounts into allocated (segregated) accounts. As you probably know, Switzerland is the pm trading hub for continental Europe and even parts of the middle East. Swiss banks have traditionally offered UNallocated paper accounts to clients. These accounts are structured like LBMA accounts or COMEX futures contracts. They have a fractional reserve backing. Noboby knows what fraction of these accounts is physically backed, but in case of the LBMA it's about 1 phys for 100 papers, ie 1%. All this paper is now on the books of the banks. The clients only have a paper claim against them. Due to the delay of Basel III, the pm portion of the UBS and CS balance sheets is considered too risky. Regulators are pushing for smaller and less "risky" balance sheets. That's why Swiss banks are encouraging their clients to take physical delivery into allocated accounts. We're not talking retail here, we're talking large institutions.
The consequences should be obvious: There will be a lot of physical buying.
Let's wait and see how the story evolves over time
Here's the article out of FT, with the obvious spin in the header and with a quite obvious advertising attempt to move the gold to London (it's an FT article afterall):
The last sentence of the article caused me to add a questionmark to the heading of this thread.
This is going to be a quite technical post, sorry for that.
As previously discussed ( http://www.pmbug.com/forum/f2/gold-considered-tier-1-status-1056/ ) , Basel III would make gold Tier1 capital (low risk), therefore increasing incentives for banks to hold physical gold (the article below gets that wrong). The implementation of Basel III has been delayed for several years, probably due to lobbying by the megabanks. Switzerland has imposed even tighter capital rules on her own, but they don't say anything about gold.
This takes us to the following FT article which states that the Swiss megabanks UBS and CS are trying to make their clients to change UNallocated gold (and silver) accounts into allocated (segregated) accounts. As you probably know, Switzerland is the pm trading hub for continental Europe and even parts of the middle East. Swiss banks have traditionally offered UNallocated paper accounts to clients. These accounts are structured like LBMA accounts or COMEX futures contracts. They have a fractional reserve backing. Noboby knows what fraction of these accounts is physically backed, but in case of the LBMA it's about 1 phys for 100 papers, ie 1%. All this paper is now on the books of the banks. The clients only have a paper claim against them. Due to the delay of Basel III, the pm portion of the UBS and CS balance sheets is considered too risky. Regulators are pushing for smaller and less "risky" balance sheets. That's why Swiss banks are encouraging their clients to take physical delivery into allocated accounts. We're not talking retail here, we're talking large institutions.
The consequences should be obvious: There will be a lot of physical buying.
Let's wait and see how the story evolves over time
Here's the article out of FT, with the obvious spin in the header and with a quite obvious advertising attempt to move the gold to London (it's an FT article afterall):
http://www.cnbc.com/id/100417100
The last sentence of the article caused me to add a questionmark to the heading of this thread.