On June 4, Department of the Treasury Office of the Comptroller of the Currency (OCC), the Federal Reserve System (the Fed), and the Federal Deposit Insurance Corporation (FDIC) issued a joint notice of proposed rulemaking.
On June 18, the FDIC issued a Financial Institution letter with the stated goal of updating banking regulations to implement changes made by the Basel Committee on Banking Supervision and the Dodd-Frank Act.
Both documents propose a positive for gold. Under the proposed new regulations, gold is to have a zero risk weighting, like dollar cash and US Treasury bonds. This will allows banks to own gold on more advantageous terms, as they won’t need to tie up other capital just to support their gold position.
One can only imagine what stress the banks must be under if the regulators and the Fed are willing to consider this extreme measure! Do they not have sufficient other assets? Or is the issue that most other assets are either garbage or already encumbered?
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