BOE’s Carney Leads Push For Bail-Ins - China and Japan Against

Published on 21 July 2014

Today’s AM fix was USD 1,312.75, EUR 970.75 and GBP 768.72 per ounce.
Friday’s AM fix was USD 1,310.25, EUR 968.40 and GBP 765.78 per ounce.

Gold fell $9.10 or 0.69% on Friday to $1,310.50/oz and silver slipped $0.29 or 1.37% to $20.85/oz. Gold and silver were both down on the week at 2.03% and 2.71% respectively.

Gold gained in London as investors were concerned re military conflict in Ukraine and Gaza. Palladium held below a 13-year high.

Source: Finviz

Gold has its first weekly loss in seven last week and fell 2.1%. Most of the falls came on Monday when there was more unusual trading and concentrated selling despite no market moving data or news. The decline last week ended the longest run of weekly gains since March.

Gold futures trading volume was 40% below the average for the past 100 days for this time of day, according to Bloomberg data.

European stock markets fell across the board today, concerned by an escalation in tensions between Russia and the West and reports the Ukrainian army set to escalate militarily and was moving on a major rebel stronghold.

Russian President Vladimir Putin is facing intensified international pressure after pro-Russian rebels were blamed for downing a passenger jet on July 17, killing 298 people on board. Putin is facing pressure to respond to claims that a Malaysia Airlines jet was downed using a missile supplied from the country. The U.S. and European Union last week tightened sanctions against Russia over its annexation of Crimea and its role in backing rebels in Ukraine.

Silver for immediate delivery rose 0.5 percent to $20.9683 an ounce in London. Platinum added 0.2 percent to $1,491.85 an ounce. Palladium increased 0.2 percent to $883.25 an ounce. It reached $889.75 on July 17, the highest since February 2001.

Geopolitical risk emanating from the Ukraine and the Middle East has contributed to safe haven demand and gold’s rebound 9.4% gains this year. Currency warslook set to intensify as financial and economic tensions build between Russia and China and western nations.

BOE’s Carney Leads Push For Bail-Ins - China and Japan Against

Officials led by Mark Carney, the Bank of England governor, are attempting to bridge sharp differences among leading G20 countries as they prepare a landmark set of proposals aimed at tackling the problem of “too big to fail” banks according to the Financial Times today.

Talks under the auspices of the global Financial Stability Board (FSB) over the summer are approaching a key stage as officials aim to clinch an agreement on bail-ins and the bailing in of creditors including depositors of banks.

Finance officials are hoping to pave the way for proposals to be tabled at the G20 leaders meeting at the Brisbane summit in November.

The issue is of major consequence to globally systemic lenders such as Citigroup, Barclays and BNP Paribas, as some will have to issue billions of dollars of fresh bonds earmarked to carry losses.

The issue is of major consequence also to depositors who could see their savings confiscated as happened in Cyprus.

The complexity of the topic and differences between countries’ legal regimes and corporate structures are raising questions over how detailed any framework will be.

Japan is one of the countries with problems with bail-in plans amid concerns that they are not easily compatible with the structure of its banking system. Its banks are heavily deposit-funded, and officials are uncomfortable about the idea of bail-ins.

Japanese banks are already vulnerable and bail-ins could hurt consumer sentiment in the already struggling Japanese economy. Concerns in Tokyo are said to be sufficiently profound for it to push its case right up to the summit itself.

China is also sceptical about the notion of private sector bail-ins given its banks are state-owned. “There are some very entrenched positions,” one official told theFT.

Russia is likely to oppose the coming bail-in regime as well as many other large creditor nations.

Mr Carney, who also chairs the FSB, said in March he wanted to “break the back” of the too big to fail issue this year. He said regulators sought by Brisbane to have cracked two major issues – on the loss absorbing capacity that big banks have to hold and on contractual provisions in derivatives contracts.

Bail-ins are coming to banks in the western world with consequences for depositors.