Tuesday, September 20, 2011

Banking System Considers Greek 1 Year Bonds a Pristine Tier 1 Asset, Gold & Silver? Not so Much

One-Year Chart for Greece Govt Bond 1Year Yield (GGGB1YR:IND)
Looks Like the Yield on a
Tier 1 Asset to You, Right?
Greek 1 year bonds are considered Tier 1 assets, yet gold and silver are considered Tier 2 and are currently in international discussions over whether they should be considered Tier 1.



LBMA campaigns for gold to be Tier 1 asset for banks under Basel III Posted on 20 September 2011
European central banks have become net buyers of gold for the first time in more than two decades, a significant sign that the role of precious metals in currency markets is not only being reassessed but actually changing, reported The Financial Times, while there also is a campaign afoot to include gold as a Tier 1 bank asset with the Basel Committee on Banking Supervision.
This week the London Bullion Market Association is meeting in Montreal, the biggest gold industry conference of the year. China, Mexico, Russia, South Korea and Thailand central banks are also net buyers of the yellow metal.
Tier 1 gold
However, the Basel III initiative is highly significant too because it would trigger a far wider use of gold within the banking system, not quite a return to the gold standard but the next best thing as far as demand for the yellow metal is concerned.
Presently Tier 1 assets include government bonds such as Greek bonds and a widening of Tier 1 to include precious metals is seen as a way of shoring up confidence in the banking sector with assets that do not require official rating because there is zero counter-party risk.
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