Gold as a bank asset in Tier 1

Abstract

The reaction of Bank for International Settlements, Federal Reserves and FDIC on monetary crisis and recent development on financial markets was suggestion that gold should belong to the group of assets Tier 1. If applicable, gold would become the best quality risk free asset with high liquidity. It could be also effectively used as collateral for financial transactions. The topic of the paper is closely related with regulation rules issued by the Basel Committee on Banking Supervision. Due to shortcomings in the current legislation regulating the banking sector was introduced new concept of Basel III regulations, which is the successor of Basel II. With the introduction of new rules in Basel III bear on changes in gold position. The gold following new rules Basel III is leaving Tier 3 group and will be classified as Tier 1. The aim of the paper is zoom in current situation conjoint with shift from Tier 3 to Tier 1.