Alchemist 63 v6_05.qxd

28 Pages·2011·3.46 MB·English

In this issue
REACH Challenges
Past, Present and Future
By Violaine Verougstraete
page 3
LBMA Executive’s Visit
to Brink’s New Vault
By Varsha Peiris and Collett Roberts
page 7
Loco London Liquidity Survey
By Stewart Murray
page 9
LBMA Summer Secondment
By Emma Attridge
page 11
The Real Price of Gold
By Fergal O’Connor
and Dr Brian Lucey
page 12
The Shanghai Gold Exchange
and its future development
By Wang Zhe
page 17
Regulation Update
Supply Chain Due Diligence
By Ruth Crowell
page 23
LBMA News
By Stewart Murray
page 24
Editorial Comment
By David Gornall Banro Corporation’s Gold Mine Project – Legitimate Mining in the DRC
page 26 The issue of conflict minerals, including gold, in the Democratic Republic of Congo is being hotly debated in
the wake of the US Dodd-Frank Act. Most discussions focus on illegal mining operations. But there is another
Facing Facts side to gold production in the DRC. The photograph shows Banro Corporation’s gold mine project at Twangiza
By Paul Burton in the east of the country which is expected to start commercial production in the fourth quarter of 2011.
page 27 For further information see the Regulation Update – Supply Chain Due Diligence article on page 23.

ALCHEMIST ISSUE SIXTY THREE
REACH Challenges
- Past, Present and Future
By Violaine Verougstraete, Health and Alloy Manager, Eurometaux
A review of the challenges faced The entry into force of the REACH substance, but who did not per se know each
Regulation (EU Regulation No 1907/2006) other. This all had to be done within a
by industry and regulators with has given significant impetus to non-ferrous limited timeframe, which triggered some
metals science and to the development of animated discussions on technical, cost-
regards to REACH. REACH is tools, so as to be able to address its sharing and resource aspects.
chemicals management requirements.
the European Community Besides being an ‘information generator’,
The need to maintain ‘access to the EU REACH has actually proven to be an
Regulation on chemicals and REACH market’ and the obligation to incredible communication challenge, forcing
demonstrate ‘responsible care’ within a fixed the actors within the same supply chain to
their safe use. It deals with the timeframe have forced us to acquire a better establish work and communication
understanding of the hazards and risks of our procedures, to exchange information on
Registration, Evaluation, materials along their lifecycle, and across the what constitutes the reality of the one and
exposures, uses and forms of the substances. the other, and to ensure rapid and joint
Authorisation and Restriction of Moreover, we had to take over the duty of familiarisation with the subtleties of both the
ensuring the proper risk management of a legal context of REACH and its
Chemical substances. substance, from cradle to grave, thereby implementation.
going beyond the usual management area,
e.g. a production site. A significant number of metals and metal
compounds had to be registered before the
These obligations have prompted a huge first REACH deadline (1 December 2010),
effort to generate data since 2006; which added considerable time pressure to
prompting industry to go back to existing these knowledge and communication
knowledge – either publicly available or challenges, resulting in some exhausted looks
available as grey literature lying around in from consortia managers when we as
drawers – in an attempt to fill in the holes Eurometaux – conveniently not registering –
in the somewhat frightening ‘data gap had to announce changes in guidance
analysis’ exercise. Strategies to make the best documents or in the tools.
use of available data, to generate the missing
information, and to develop methodologies All in all, the sector was able proudly to
and tools had to be agreed by groups of announce on 1 December that the non-
people sharing interests in one and the same ferrous metals industry had successfully
page 3
THE LONDON BULLION MARKET ASSOCIATION
reached the first REACH registration will involve further resources that will have registration, then evaluation and finally
deadline, and even to add, in the same to be accounted for in consortia work authorisation) seem to have put certain
enthusiastic sentence, that we were aware programmes. regulators on hold to some extent. They had
that this first deadline was only a first step to prioritise the organisation of enforcement
and that other challenges would follow. Within the last four years, industry has of activities and resources for the further
necessity built up significant expertise in REACH processes. They also had to wait for
The post-2010 registration recovery chemicals management and in ‘thinking in the dossiers to become available, rather than
period has actually been short. Not only applied mode’. We have been driven by the being actively involved in brainstorming on
because the sector had to get down to the need to find pragmatic solutions to technical issues in the dossiers as they may
business of preparing the registration of conceptual issues. Some examples are: have been in the past. Regulators seem to
lower tonnage substances, but also because a) how to deal with the aspects of ‘data-rich have been somewhat out of the technical
some of the challenges that we had foreseen substances’ in a system designed for ‘data- information circuit. On the other hand,
in December soon began to show their faces, poor’ and ‘safety factor’ approaches; b) the several regulators seem to have made use of
during “post-registration debriefings” management of uncertainty versus that registration time to better qualify what
organised by industry and in meetings with precaution; and c) the consideration of they are expecting from the REACH
the REACH enforcement regulatory aspects such as the massive form of process and to identify the
authorities. the material or its ‘complex shortcomings of REACH that
composition’. To overcome need to be addressed (e.g.
Future Challenges defaults in guidance documents combined effects).
At this point, let me mention some of the or overly predictive
challenges I see in the follow-up to estimations generated by All in all, the sector There is an
registration at consortia, regulatory and site models that did not take unfortunate timing
level. The focus will deliberately be on some account of metal-specific was able proudly to incompatibility here:
of the technical challenges, which may in my aspects such as natural while we as industry
opinion have an impact on the overall occurrence, certain announce on 1 December are now awaiting
valuation of the data collection effort for biological mechanisms their evaluation and
registration. and essentiality, we that the non-ferrous metals would now be in a
had to go back to the position to
To start with, the fact of having sector data and industry had successfully communicate on
submitted a dossier for a substance on develop metal-specific lessons learnt from
1 December did not mean that the ‘R’ tools and approaches. reached the first REACH registration, the
(‘Registration’) page of REACH could be These ‘solutions’ have REACH Regulators
turned. It remains an active process, required discussions, registration deadline, and are now themselves
requiring further attention and resources exchanges of faced with a huge
from consortia – not always planned for at information, even to add, in the same amount of
the time when the consortia were set up. workshops and information, are
There will be the necessary updates of the significant volumes of enthusiastic sentence, that subject to time
submitted files linked to for example new ‘guidance notes’ pressure and are
information becoming available, or triggered spread throughout all we were aware that this first propelled towards
by ECHA guidance changes and/or future the consortia. ‘learning by doing’
reviews of REACH. In addition, some Interestingly, this deadline was only a first within newly set-up
cosmetic updates of certain files are essential move to committees, with new
necessary. As a matter of fact, it should be pragmatism has enabled step and that other fields to address.
realised that despite the general willingness more industry people to ‘Breaking in’ the system
and considerable efforts made, the dossiers be involved in the technical challenges would and limited timeframes
submitted in 2010 have often only been “as discussions, previously left do not give regulators
good as possible” and could still have some up to the metals science follow. much opportunity either to
weak spots when it comes to evaluating their professionals. Compared with familiarise themselves with
completeness and defending a substance. three years ago, both in the recent science and
Even in the non-ferrous metals sector, which associations and companies, many techniques built up for REACH
has a solid tradition of co-operative work more industry people are now used to by the various sectors, or to
and is skilled at working together on multi- finding their way around the jungle of communicate on their registration period
metallic risk assessment and classification acronyms used in metals science; they reflections.
projects, some differences among the understand what risk assessment means and
dossiers can be detected. The approaches question the practical implications of This mismatch in schedules and priorities
used are broadly similar, but the devil is classifications, Derived No Effect Levels now leaves us with a kind of gulf between
lurking in the detail behind missing (DNELs) and Exposure Scenarios. The authorities and industry. For as long as both
justifications, overly brief explanations, and situation naturally still leaves room for sides cannot meet and find means and
sometimes inconsistencies between one improvement, but overall, knowledge has dialogue on their respectively acquired
compound and another. These flaws are a increased and been brought right up to date. expertise, this gulf could, in my opinion,
visible sign of the lack of time before the adversely affect the discussions on the
2010 deadline, which did not enable all the Regulators and Industry Experts – REACH dossiers and substances:
metals to move together, at the same speed, Communication Challenges
•
towards complying with all the information What about the regulatory bodies’ experts? First of all, despite the fact that we have
requirements. Work has begun on addressing The setting up of REACH and its sequential never had as much information as now, the
these shortcomings, but it will take time and implementation (focusing first on word ‘precautionary’ again seems to be
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THE LONDON BULLION MARKET ASSOCIATION
actively part of the debates. Without covered by the scope of the REACH, such
becoming familiarised with this mass of data, as the importance of diffuse emissions,
how to handle the latter and their mixture toxicity, etc.
limitations, the ‘unknown’ remains a barrier,
whatever the amount of information that Finally, we need to address the challenge
may impel regulators to remain of making the best use of the data generated
precautionary or not to fully consider the at all levels, thinking beyond just the
data collected. REACH-related steps. This is true for the
EU, where companies are still exposed to
•
There is a normal human tendency to go legislation and regulatory ‘hints’ other than
back to what is known rather than diving REACH. While efforts are being made at
into the unknown, particularly when there is legislative level to solve some potential
pressure to deliver a certain amount of overlaps and to streamline the overall Violaine Verougstraete
work. This can now be observed in the framework, responses should be found in the Eurometaux
choice of some substances to be scrutinised meantime to the practical questions that Violaine Verougstraete studied medicine
through REACH processes: some of these companies may pose: how to evaluate the and toxicology at the Catholic University
have already been extensively and REACH data, how to make the best of Louvain, did a DEA in Public Health
exhaustively discussed in earlier use of the ‘core tools’ of and obtained her PhD in Public Health
or other Chemical Management REACH, such as Exposure in 2005 from the Catholic University of
systems, and the question Scenarios and DNELs, how Louvain (Belgium).
then arises as to whether these should be
this will enable the incorporated into day-to- She worked as a researcher at the
objective of REACH to It is imperative day practice versus older Industrial Toxicology and Occupational
be achieved, i.e. to references or tools Medicine Unit of the Catholic University
streamline and to avoid discussions proposed by other of Louvain for eight years. She
improve the former pieces of legislation. collaborated in the EU Risk Assessment
legislative hampering the added value To address this could “Cadmium and Cadmium Oxide”. Since
framework. avoid filling May 2005, she has been working for
of the efforts made by both cupboards once Eurometaux as Health and Alloys
Going Forward again with piles of Manager. She is currently co-ordinating
It is imperative to industry and regulators. Although unread papers. the scientific activities and projects of
avoid discussions Eurometaux, such as for example the
hampering the the roles and rules Outside the EU, HERAG and MERAG (risk assessment)
added value of the several jurisdictions projects, classification projects, and
efforts made by for the REACH actors are well are following with human toxicology and ecotoxicology-
both industry and interest what is related activities.
regulators. outlined in the legal text and ongoing in the
Although the roles REACH scene, in
and rules for the guidance documents, this does order to both draw
REACH actors are lessons and get
well outlined in the not prevent emotion and/or information. This is
legal text and an opportunity for
guidance documents, frustration from some harmonisation of
this does not prevent datasets and of technical
emotion and/or bubbling up. aspects; and the OECD
frustration from bubbling definitely plays a key role
up. I believe that it is even in this field.
more vital to overcome this
communication challenge when Conclusion
considering that it was not possible REACH does not end with the
to solve all the technical issues in risk successful submission of a completed
assessment and classification before registration dossier. This is only the
December 2010. In the metals sector, we beginning, in fact. A number of challenges
still have ahead of us a number of important and difficulties arise that could impact on the
questions to solve, related for example to further process and its success. While these
the characteristics of “complex materials”, to challenges seem to weigh preferentially
testing difficulties and/or to data generation. either on the industry side or on the
We need a platform where we can discuss regulatory side, they concern all the REACH
methodological proposals with experts actors involved, and it is by solving them
involved in REACH committees and together that we shall guarantee the
regulators involved in enforcement, so as to functioning and valuation of the efforts made
be able to propose the most appropriate safe up to now.
use solutions to industry. Such platforms
would allow us to discuss also forthcoming
scientific challenges that are currently not
page 6
ALCHEMIST ISSUE SIXTY THREE
LBMA Executive’s Visit
to Brink’s New Vault
By Varsha Peiris and Collett Roberts, LBMA
In April 2011, the LBMA the transportation and storage of physical
bullion had increased in line with this
Executive embarked on a visit to demand for physical stock. Having a vault
above ground made dealing with the higher
Brink’s UK’s new bullion vault, volumes and physical movement easier, due
to the good access points.
located within the M25.
Security
The vault took nearly two years to build,
About Brink’s using impeccable security skills and materials
Brink’s is a secure logistic organisation to make it the highest European CEN grade
involved in various sectors including the that currently exists. Given its unique status
transportation, handling and vaulting of of one of the first above-ground vaults in
precious metals, with over 150 years of London, additional security was required.
experience. It is the third-largest bullion Layers upon layers of structural security
vaulting organisation yet the only one which precautions were included in the build. particularly excited to see the London Good
is not a banking institution and the largest These were to prevent lorries from being Delivery bars. However, security at this
bullion carrier in the UK. Brink’s Ltd (UK), able to ram the vault as well as to prevent point was of course extremely high. It was
headquartered in London, has been an intruders approaching by helicopter or an amazing feeling to be standing so close to
Ordinary Member of the LBMA since catapult. This new vault actually has higher these gold bars that were locked up behind
April 1988. than the maximum security rating required, bars. So close, but yet so far!
which leads us to think that it should be
First Impressions nominated for a scene in a James Bond During the tour, it was interesting to see
We arrived at the secret location; Brink’s movie. both new and old machinery being used,
new above-ground vault. Instantly, there was such as the electronic weighing scales and
a distinction compared to its other vaults The Tour the traditional beam balances. It was clear
that we have visited when attending bar The Executive began their journey around that although vault staff were keen to use
inspections. The new vault had a the labyrinth of steel and high-tech security; the new electronic scales introduced in
distinguished interior and exterior primarily it was like walking around a showroom. 2010, they were not quite ready to let go of
due to the apparent massive investment in However, we were instantly reminded that the tried and trusted way of weighing
external security. This vault joins the ranks we were in a bullion vault when we reached bullion on the traditional beam balances.
of Fort Knox, which also has above-ground the stacks of silver bars. These bars were
vaulting facilities. stacked on pallets to almost full capacity of Future Plans
the floor, which felt like the size of half a After our exclusive morning tour, we were
Once through security, we were met by football pitch. The sheer depth and volume treated to a lovely lunch with all of our
Simon Churchill, Sales Executive. Simon of the vault was very overwhelming. Brink’s hosts and were given the background
introduced us to various senior members of of Brink’s Ltd as well as the opportunity to
staff, including Ms Orit Eyal-Fibeesh, After travelling through the silver and ask questions. It was interesting to learn
Managing Director, and Phil Wright, Head coin vaults, we finally reached one of the about the importance for Brink’s to maintain
of Security, who gave us the LBMA’s gold vaults. Working at the LBMA, we were a perfect balance between storage volume
exclusive tour. and liability/security. We were surprised to
learn that although this new vault had only
The Need for Expansion been open for a very short period, it was
Before the long-awaited tour started, we already nearly full. Due to the continued
were given an informative briefing as to why demand for secure vaulting space, Brink’s
Brink’s had taken this huge step to expand was already considering expanding by
and build a new vault. Due to the building another new vault.
uncertainty in the financial market, investors
keen to invest their funds in a secure The LBMA would like to thank all the staff at
commodity had turned to the precious Brink’s involved in arranging this visit and we are
metals markets. In light of this perception, looking forward to our tour of their next vault!
they had begun investing in gold because it
was seen as a ‘safe haven’, and retail as well
as wholesale transactions caused the demand
for supply to rise significantly. Consequently,
page 7

ALCHEMIST ISSUE SIXTY THREE
Loco London Liquidity Survey
LBMA Gold Turnover Survey for Q1 2011
By Stewart Murray, Chief Executive, LBMA
Background issue is whether gold should be considered as From the outset, great care was taken to
At its meeting in April, the Management a “high-quality liquid asset” so that it can be ensure the confidentiality of the data
Committee agreed that the Executive should included in the liquidity buffers that banks submitted. All Members were given an
carry out a survey of Members’ trading must meet. Although the Basel Committee identifying code and asked to use that on the
turnover in the loco London gold market. did not recommend the inclusion of gold in reporting form rather than their company
All members were asked to volunteer data, these liquidity buffers, the implementation of name. The list of identifying codes was
by providing, on a confidential basis, their the Basel guidance by national legislators and maintained in an encrypted file that only two
turnover figures for spot, forwards and other the European Union legislators may still members of staff had the password for. All
transactions in the first quarter of 2011, with allow gold to be included if they can be members were given two data delivery
the data to be divided, if possible, between persuaded that gold is, indeed, a high-quality points, which were the LBMA or the Bank
trades with other members and trades with liquid asset. The World Gold Council has of England.
non-members. As most readers will be been pursuing this goal over the past two
aware, the LBMA is not an exchange and it years and it requested the LBMA to carry Results of the Survey
does not require its members to report on out a survey of turnover in order to Ultimately, 36 of the 56 Full Members
turnover. The only statistics which are strengthen its argument that the gold involved in trading gold submitted returns.
produced on a regular basis by the LBMA are market is sufficiently deep and liquid to These included all of the LBMA’s spot and
the monthly clearing statistics, based on justify gold’s characterisation as both high forward market makers.
returns from the six clearing members which quality and liquid.
together form the London Precious Metals The results of the survey are summarised
Clearing company. The only previous surveys Conduct of the Survey below in terms of daily averages during the
of trading turnover were those carried out by All Members were sent the reporting form at period (Figure 1). Also shown for
the Bank of England in 1991, 1994 and the end of April, which asked for the data on comparison are the clearing turnover
1996, and these were restricted to the spot and forward transactions to be divided statistics. It should be noted that the figures
LBMA’s market makers. into sales and purchases, and between provided for trade between members were
members and with other counterparties. divided by two in order to avoid double
So, why did the Management Committee The third catch-all category of “other counting. This is rather conservative in that
decide to authorise a survey of members’ transactions” was also included to cover, many of the trades reported with members
gold trading? The answer lies in Europe or, for instance, options and bullion-related would be with members that were not
more precisely, in the discussions within the commodity swaps. The data to be included themselves reporting. The figures for sales
Basel Committee on Banking Supervision on in the survey did not include deposits and purchases should be added to get an idea
the new liquidity regulations for banks. The or loans. of the total trading turnover.
(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:2)(cid:9)(cid:2)(cid:10)(cid:2)(cid:11)(cid:12)(cid:13)(cid:14)(cid:2)(cid:15)(cid:6)(cid:7)(cid:16)(cid:8)(cid:17)(cid:2)(cid:18)(cid:19)(cid:2)(cid:11)(cid:18)(cid:20)(cid:18)(cid:2)(cid:11)(cid:18)(cid:21)(cid:22)(cid:18)(cid:21)(cid:2)(cid:23)(cid:18)(cid:24)(cid:22)(cid:2)(cid:25)(cid:6)(cid:7)(cid:21)(cid:18)(cid:16)(cid:8)(cid:7)
(cid:26)(cid:9)(cid:2)(cid:27)(cid:28)(cid:9)(cid:9)(cid:2)(cid:25)(cid:6)(cid:7)(cid:21)(cid:18)(cid:16)(cid:8)(cid:7)(cid:29)
(cid:25)(cid:18)#$(cid:24)(cid:2)%$(cid:24)(cid:6)(cid:8)
(cid:30)(cid:28)(cid:28)(cid:28)(cid:2)(cid:18)(cid:6)(cid:21)(cid:20)(cid:8)(cid:31) (cid:6)!"(cid:8)(cid:7)(cid:2)(cid:18)(cid:19)(cid:2)#(cid:7)$(cid:22)(cid:8)(cid:31) (cid:25)(cid:18)#$(cid:24)(cid:2)%$(cid:24)(cid:6)(cid:8)(cid:2)&(cid:15)$(cid:24)(cid:8)(cid:31)’
&((cid:6)(cid:7)(cid:20))$(cid:31)(cid:8)(cid:31)’
*(cid:15)$(cid:24)(cid:8)(cid:31) *((cid:6)(cid:7)(cid:20))$(cid:31)(cid:8)(cid:31) (cid:15)$(cid:24)(cid:8)(cid:31) ((cid:6)(cid:7)(cid:20))$(cid:31)(cid:8)(cid:31)
(cid:11)(cid:18)(cid:21)(cid:22)(cid:18)(cid:21)(cid:2)(cid:25)(cid:6)(cid:7)(cid:21)(cid:18)(cid:16)(cid:8)(cid:7) 5,593,743 5,350,183 201,713 184,140 $7,754,438,081,578 $7,416,798,373,170
(cid:25)(cid:18)#$(cid:24)(cid:2)(cid:11)(cid:18)(cid:20)(cid:18)(cid:2)(cid:11)(cid:18)(cid:21)(cid:22)(cid:18)(cid:21)(cid:2)(cid:25)(cid:6)(cid:7)(cid:21)(cid:18)(cid:16)(cid:8)(cid:7) 10,943,926 385,852 $15,171,236,454,748
(cid:11)((cid:13)+(cid:11)(cid:2)+(cid:24)(cid:8)$(cid:7)(cid:4)(cid:21)(cid:5)(cid:2)(cid:15)#$#(cid:4)(cid:31)#(cid:4)(cid:20)(cid:31) 1,183,459 122,303 $1,640,689,519,546
(cid:11)(cid:18)(cid:21)(cid:22)(cid:18)(cid:21)(cid:2),$(cid:4)(cid:24)(cid:17)(cid:2)(cid:14)(cid:16)(cid:5) 173,713 6,125 $240,813,277,059
(cid:15)-(cid:18)# 89% 91%
(cid:3)(cid:18)(cid:7).$(cid:7)(cid:22)(cid:31) 5% 4%
/#)(cid:8)(cid:7) 6% 5%
*Source: LBMA, Comprised of data from 36 LBMA Members, including all spot and forward Market Makers, for spot and forward Loco London transactions
page 9
THE LONDON BULLION MARKET ASSOCIATION
(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:2)(cid:27)(cid:2)(cid:2)(cid:10)(cid:2)(cid:11)(cid:12)(cid:13)(cid:14)(cid:2)(cid:15)(cid:6)(cid:7)(cid:16)(cid:8)(cid:17)(cid:2)(cid:18)(cid:19)(cid:2)(cid:11)(cid:18)(cid:20)(cid:18)(cid:2)(cid:11)(cid:18)(cid:21)(cid:22)(cid:18)(cid:21)(cid:2)(cid:23)(cid:18)(cid:24)(cid:22)(cid:2)(cid:25)(cid:6)(cid:7)(cid:21)(cid:18)(cid:16)(cid:8)(cid:7)(cid:2)(cid:10)(cid:2)(cid:26)(cid:9)(cid:2)(cid:27)(cid:28)(cid:9)(cid:9)
(cid:11)(cid:18)(cid:20)(cid:18)(cid:2)(cid:11)(cid:18)(cid:21)(cid:22)(cid:18)(cid:21)(cid:2)(cid:26)(cid:9)(cid:2)(cid:27)(cid:28)(cid:9)(cid:9)(cid:2)(cid:25)(cid:6)(cid:7)(cid:21)(cid:18)(cid:16)(cid:8)(cid:7)(cid:2)(cid:20)(cid:18)!-$(cid:7)(cid:8)(cid:22)(cid:2)#(cid:18)(cid:2)(cid:26)(cid:9)(cid:2)(cid:11)((cid:13)+(cid:11)(cid:2)+(cid:24)(cid:8)$(cid:7)(cid:4)(cid:21)(cid:5)(cid:2)(cid:15)#$#(cid:4)(cid:31)#(cid:4)(cid:20)(cid:31)
LPMCL Clearing Statistics*
Total Loco London Turnover
LPMCL Clearing Statistics*
These figures contain:
- Loco London book transfers from one party in a
clearing member’s books to another party in the
same member’s books or in the books of another
clearing member
- Physical transfers and shipments by clearing
members
- Transfers over clearing members’ accounts at the
Bank of England.
Excluded from these statistics are:
- Allocated and unallocated balance transfers where
the sole purpose is for overnight credit
- Physical movements arranged by clearing members
in locations other than London.
It can also be seen that there is an Natalie Dempster, Director of Market demand for gold to be used as a
approximately ten to one ratio Government Affairs at the World high-quality liquid asset and as collateral has
between the turnover figures and Gold Council, commented on been building for some time. In late 2010,
the clearing statistics (Figure the vote: ICE Clear Europe, a leading European
2). It can be seen that spot It is very “It is very significant that the derivatives clearing house, became the first
transactions form the large European Parliament is clearing house in Europe to accept gold as
majority of the total significant that the putting its weight behind collateral. In February 2011, JP Morgan
(around 90%), with the argument that the became the first bank to accept gold bullion
forwards and other European Parliament is unique characteristics as collateral via its tri-party collateral
transactions each of gold make it an management arm. Exchanges across the
representing around putting its weight behind the ideal form of high- world, such as the Chicago Mercantile
5%. The average quality liquid Exchange, are now accepting gold as
daily trading argument that the unique collateral. We now collateral for certain trades and London-based
volume in the look forward to clearing house LCH Clearnet has said that it
London market in characteristics of gold make it an the European also plans to start accepting gold as collateral
this period was Parliament and later this year, subject to regulatory approval.
173,713,000 ideal form of high-quality liquid Council of the As regulators from G20 countries demand
ounces or European Union that more OTC trading is centrally cleared
$240.8 billion collateral. We now look forward upholding the and with the on-going world economic
(Figure 1). inclusion of gold difficulties further eroding the
to the European Parliament and in the next stage creditworthiness of other forms of collateral,
Basel III of negotiations we expect to see increasing demand by
Implementation Council of the European Union around EMIR, clearing houses, exchanges and investment
–European which will take banks to use gold as collateral”.
Parliament upholding the inclusion of gold in place in September.
Update The ratification
In July, the the next stage of negotiations would mark a
European Parliament significant step forward
voted unanimously to around EMIR, which in redefining what
recommend that central constitutes a highly
counterparties accept gold will take place in liquid asset under the
as collateral, under the Capital Requirements IV
European Market September. Directive too.
Infrastructure Regulation
(EMIR).
page 10