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Britain exempts gold-clearing banks from Basel 3 rule
By Peter Hobson
Reuters
Friday, July 9, 2021
LONDON -- A British regulator said today that banks clearing gold trades in London could apply for an exemption from tighter capital rules due in January 2022, removing what some said was a threat to the functioning of the market.
London is the world's biggest physical precious metals trading hub. Its clearing system, operated by a handful of large banks with access to metal in vaults, settles gold transactions worth around $30 billion a day.
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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.
The London Bullion Market Association (LBMA), an industry body, has lobbied against them, saying they are unnecessary and could force some banks – including clearing banks - to stop trading.
Following a consultation, 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. ...
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