Los Angeles, CA (PRWEB) October 20, 2012
According to Business Insider, gold will officially become considered a “currency” again, at its new market-value, and no longer a mere commodity when the new rules become fully put into effect. The value of gold will likely soar because everyone will recognize that gold has been undervalued as a mere "commodity." “This information has not yet been factored into gold prices,” says Eric Zuesse, the author of the article.
The Basel Committee for Bank Supervision (BCBS), a global banking regulatory group that meets in the small mountain town of Basel, Switzerland, every few years is a group of bankers who are responsible for setting global banking standards. They decide things like which assets qualify as Tier 1 or “zero-risk” assets, how much loan loss reserves banks need to hold, and how much leverage banks can take on. As the maker of global capital requirements and whose Basel III rules form the basis for global bank regulation is looking to make gold a bank capital Tier 1 asset. As a result of the global debt crisis in 2008, banks had more stringent Tier 1 collateral (or assets) to loans requirements implemented. The new rules require 7% Tier 1 collateral of loans be held versus 2% prior to the debt crisis.
Gold has historically been classified as a Tier 3 asset and a decision by this committee of banking supervisory authorities established by the central bank governors of the Group of Ten countries in 1974 is looking to make gold the new “zero risk” collateral. As the only non-Tier 1 asset to be universally regarded by investors the world over as a “flight-to-safety” asset, gold will become further desired.
Banks will operate with far less equity capital than is normally required and gold will be the new backstop for debt, currencies and bank equity capital. It would be competing as a safe haven investment against un-backed bonds yielding less than zero in inflation adjusted terms and issued by over indebted governments (sovereign bonds), which would create substantial additional demand for physical gold bullion and be an important step toward gold's re-monetization.
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