Will Basel 3 Boost Gold and Silver Prices?
By GCRU Gold News on Wednesday, June 2 2021, 00:22 - Permalink
The Basel 3 accord. The most important change for precious metals is that banks would be required to hold reserves against their assets. Under the coming regulations, banks would count unallocated precious metals at 85 percent of their value on the bank’s books in making the determination of how much it needs to hold in reserves against these assets.
However, banks would no longer be able to consider any of the liability for unallocated precious metals as part of their required reserves.
Therefore, to comply with Basel 3 regulations, banks would have to either create a huge increase in their shareholders’ equity to provide the required reserves or they will be forced to sharply reduce or completely eliminate their trading in unallocated precious metals.
Will these banks take title and custody to many times the quantity of physical precious metals that they now hold? For all practical purposes that isn’t possible because there just aren’t enough physical metals available.