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Tough liquidity rules could push more banks out of gold, LBMA says

Section: Daily Dispatches

By Clara Denina
Monday, October 19, 2015

VIENNA, Austria -- New liquidity rules for banks in the European Union could raise costs for those trading gold by up to 300 percent, forcing them to withdraw from the market, the head of the London Bullion Association said.

Banks were found to be undercapitalised after the financial crisis began in 2007, forcing taxpayers to bail out many lenders and prompting the development of a global set of tougher rules known as Basel III.

The rules treat physically traded gold the same as other commodities, meaning banks trading the metal would have to carry more cash and cash equivalents as a proportion of their gold exposures to act as a buffer if there is an adverse move in the gold price. ...

This, the LBMA and other industry bodies argue, makes funding gold transactions for commercial banks difficult and increases the cost of doing business. ...

... For the remainder of the report:


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