Page 25 - Bullion World Issue 4 August 2021

Bullion World | Issue 04 | August 2021

LBMA Efforts to

Date on Net

Stable Funding

Ratio (NFSR)

LBMA, alongside other relevant market funding factor reduced to 50% or less, its position. The policy material in
The best time to buy a stakeholders, has long been engaged depending on what level the central bank their policy statement, as published,
CombiBarTM was 10 years ago. in discussing the impact of Basel III and prudential regulators considered is near final. The PRA does not

The second best time is now. with regulators and relevant national appropriate. intend to change the policy or make
authorities. Discussions have covered significant alterations to the text of the
the following issues: Initially, lobbying efforts were directed to instruments before the making of the
the European Banking Authority (EBA), final policy material. The PRA expects
The first was the Liquidity Coverage the Prudential Regulatory Authority to publish the final rule instruments in
Ratio (LCR). This rule would ensure (PRA) in the UK as well as other relevant a subsequent Policy Statement, after
that banks have an adequate stock EU member states, as well as the BCBS. HM Treasury has published the relevant
of unencumbered HQLA that can be From these meetings and subsequent Statutory Instrument (SI) to support the
converted easily and immediately in regulatory liquidity publications it implementation. This policy is intended to
private markets into cash to meet their transpired that central bank and take effect on 1 January 2022.
liquidity needs for a 30-calendar day prudential regulators could not measure
liquidity stress scenario. However, at the risks for gold in the same way as other European Union
time the HQLA list was being discussed, asset classes due to the lack of data in Following a request by LBMA to the
the gold market did not have enough the Over-the-Counter market (OTC). European Commission, an assessment
data to support gold’s position. Therefore is being carried out by the European
in 2013, BCBS decided that gold would Following a membership market review Banking Authority (EBA). The EBA shall
fall outside of the HQLA list. in 2015, it was agreed that LBMA would assess whether it would be justified
collect and disseminate trade data to to reduce the NSFR for assets used
The second was the NSFR. Designed provide transparency to the OTC market for providing clearing and settlement
to limit overreliance on short-term and use the data to build the case for services of precious metals or assets
wholesale funding and to encourage gold as an HQLA. The first trade data used for providing financing transactions
better assessment of funding risk across emerged in 2018, which showed that of precious metals of a term of 180 days
all on- and off-balance sheet items, when compared to other HQLA assets, or less. The assessment will be published
NSFR aimed to promote funding stability gold performed as well as – if not better in November 2021.
in the market. than – other level one and two asset
classes. Other Jurisdictions
LBMA’s initial response questioned Through the support of LBMA members,
the 85% RSF within the NSFR rules, What’s Happening Now? LBMA is exploring further lobbying
and questioned why gold was not United Kingdom efforts with other jurisdictions given that
considered HQLA within the Liquidity As outlined above, the UK PRA has the data LBMA holds is new, and was not
Coverage Ratio (LCR) rules. Being consulted on the implementation of available when the policy decisions were
designated as an HQLA would see the the Basel III standards and provided made.
Source: LBMA

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