Question discussed at the 2012 general meeting
Depending on the conditions and prospects on the gold market, the Bank lends part of its gold assets against collateral.
As collateral, the Bank receives fixed-income securities with excellent credit quality. Haircuts are applied to this collateral, the value of which always covers more than 100 % of the gold loans' total current market value. As soon as the value of the collateral drops below 101 % of the gold loans' market value, the Bank makes additional margin calls. The collateral provided is monitored closely by means of daily mark- to-market of both the outstanding position and the collateral provided.
The risk is not only limited by the quality of the required collateral and the monitoring of the positions, but also by the careful choice of the counterparty (commercial banks with a sufficiently high credit rating).
Given the maturity of some longer-term gold loan transactions and given the market conditions for collateralized gold loans - both as regards the gold market and as regards collateral cost - , the amount of gold lent has decreased at the end of May 2012 when compared with the end of 2011. At the end of May 2012, there are outstanding gold loans with five commercial banks for a total of 36.9 tonnes of gold.