The European Gold Confiscation Scheme Unfolds: European Parliament Approves Use Of Gold As Collateral

Tyler Durden's picture

Wonder why Europe is pressing so hard for Greece (and soon the other PIIGS) to collateralize its pre-petition loans on a Debtor in Possession basis? Here is your answer: "Yesterday’s unanimous agreement by the European Parliament’s Committee
on Economic and Monetary Affairs (ECON) to allow central counterparties
to accept gold as collateral, under the European Market Infrastructure
Regulation (EMIR), is further recognition of gold’s growing relevance as
a high quality liquid asset. This vote reinforces market demand for a greater choice of assets that can be used as collateral to meet margin liabilities." Luckily for Greece, it has 111.5 tons of gold in storage (somewhere at the New York Fed most likely). Looking down the road, Portugal has 382.5 tons, Spain 281.6, and Italy leads the pack with 2,451.8 tons.

Complete press release:

The Economic and Monetary Affairs Committee of the European Parliament has approved gold to be used as collateral confirming its status as a high-quality liquid asset

Yesterday’s unanimous agreement by the European Parliament’s Committee
on Economic and Monetary Affairs (ECON) to allow central counterparties
to accept gold as collateral, under the European Market Infrastructure
Regulation (EMIR), is further recognition of gold’s growing relevance as
a high quality liquid asset.

This vote reinforces market demand for a greater choice of assets that can be used as collateral to meet margin liabilities.

Natalie Dempster, Director of Government Affairs at the World Gold Council said:

“It is very significant that the European Parliament is putting its
weight behind the argument that the unique characteristics of gold make
it an ideal form of high quality liquid collateral.

“We now look forward to the European Parliament and Council of the
European Union upholding the inclusion of gold in the next stage of
negotiations around EMIR which will now take place after the July
plenary vote. The ratification would mark a significant step forward in
redefining what constitutes a highly liquid asset under the Capital
Requirements IV Directive, due in the coming month, from the European
Commission.”

Market demand for gold to be used as a high quality liquid asset and as
collateral has been building for some time. In late 2010, ICE Clear
Europe, a leading European derivatives clearing house, became the first
clearing house in Europe to accept gold as collateral. In February 2011,
JP Morgan became the first bank to accept gold bullion as collateral
via its tri-party collateral management arm. Exchanges across the world,
such as Chicago Mercantile Exchange, are now accepting gold as
collateral for certain trades and London-based clearing house LCH
Clearnet has said that it also plans to start accepting gold as
collateral later this year, subject to regulatory approval.

The World Gold Council has examined this trend and has defined the
characteristics that make gold an excellent form of collateral in its
study “Gold as a source of collateral”. The report includes a case study
on ICE Clear Europe, explaining why the central counterparty clearing
house has started to accept gold as collateral and how this operates in
practice.

“As regulators, from G20 countries, demand that more OTC trading is
cleared on exchanges and with the ongoing world economic difficulties
further eroding the credit worthiness of other forms of collateral, we
expect to see increasing demand by clearing houses, exchanges and
investment banks to use gold as collateral,” says Natalie Dempster.

 

In order to legitimize this precursor to full blown gold sequestration (on a purely voluntary basis of course, as credit money is received while physical PMs are pledged), the WGC has even put together this pretty presentation:


gold as collateral