US case study: Enhancing commercial bank liquidity buffers with gold

Published 4th April 2012

Categories: Investment, Reserve asset management

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As part of gold's growing financial usage the World Gold Council conducted a case study to examine gold's potential role on bank balance sheets as part of new liquidity buffers being discussed in global banking regulations within Basel III. The following case study examines the effect of adding gold to the Basel III Liquidity Coverage Ratio (LCR) and finds that, by including gold as an eligible asset in bank liquidity buffers, commercial banks would reduce the volatility of their LCR portfolios, reduce the value-at-risk of their portfolios, and improve their risk-adjusted returns.