IMF to make central bank gold lending data more transparent
By: Dorothy Kosich 23-JAN-07 08:00GMT
RENO, NV (Mineweb.com) --A Blanchard & Company study calling for greater transparency in central bank gold lending accounting has apparently helped to convince the International Monetary Fund to adopt a landmark accounting change in the way central banks account for gold loans.
The December 2006 study by Blanchard Vice President and Director of Economic Research Neal R. Ryan suggested that if more transparent governance was implemented in central bank gold lending, “gold prices will experience exponential growth because they will become a reflection of a fair and equitable market for all participants.”
“The IMF has essentially stated that they believe the market should receive correct accounting on loan information. The final test will be the implementation of the new accounting rules,” Ryan said at the time.
On Monday, New Orleans-based Blanchard announced that newly adopted IMF accounting changes mean that central banks will no longer include the amount of gold they have loaned and sold into the market as part of their reserve total assets,” according to Blanchard Chairman and CEO Donald W. Doyle, Jr.
Ryan declared that the IMF action “changes the entire landscape of the gold market for the betterment of all participants involved, because there is now data available that has never previously been published. A transparent market is a healthy market, and the gold market just got a lot healthier.” He added that it will take the IMF some time to institute the new accounting procedures.
Central banks have their purchases and sales of gold tallied by the IMF International Reserves and Foreign Currency Liquidity Statistics Department, and are updated every three months by the World Gold Council. Ryan asserted that while central banks report sales and purchases to the IMF, they do not report their levels of holdings on loans. He contends that “gold swaps between banks have just as large an impact on the market as gold loans, and even less is known about them in the marketplace.”
Blanchard is the largest U.S. retailer of American rare coins and precious metals. Its economic research unit provides precious metals market analysis for the financial and consumer media.
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IMF Has Not Adopted Accounting Changes to Gold Loans
By Jon A. Nones 25 Jan 2007 at 04:06 PM EST
St. LOUIS (ResourceInvestor.com) -- Earlier this week Blanchard & Co., a New Orleans-based bullion and coin dealer, released a press statement saying the International Monetary Fund (IMF) has adopted a number of accounting changes to the lending of gold reserves by central banks, and will begin implementing those changes in the coming year. IMF told Resource Investor today otherwise.
In response to press queries about a January 22 press release from Blanchard, claiming the IMF made accounting changes for recording gold loans, IMF spokeswoman Conny Lotze sent the following statement to RI:
“At this time the IMF has not adopted any new accounting changes for the recording of gold loans. A review is taking place in the context of the update of the fifth edition of the IMF's Balance of Payments Manual and has involved experts from the Fund, other international agencies, and a number of member countries,” said Lotze.
The IMF’s Balance of Payments Manual governs the accounting and reporting functions of central banks through a set of rules and regulations. The manual regulates how reporting should be handled across a large spectrum of issues, which includes gold swaps and loans.
Blanchard’s statement was a follow-up to a paper by the company published on December 14, 2006, entitled “Gold Market Lending,” which prompted a debate with Kitco’s Jon Nadler. Within the paper, Blanchard’s Director of Economic Research Neal Ryan alleged that unaccounted amounts of gold loaned into the market had a direct impact on the price.
He said the IMF had been reviewing all aspects of their Balance of Payments Manual so that proper updates to the Manual can be implemented in the near future. This week’s statement by Blanchard said that the IMF had indeed made the decision to go ahead with changes to the way central banks account for gold loaned in the market.
Blanchard Chairman and CEO Donald W. Doyle, Jr. said the newly adopted accounting change means that central banks will no longer include the amount of gold they have loaned and sold into the market as part of their reserve total assets.
He added, “this decision by the IMF will greatly redress that issue as these accounting changes are implemented.”
However, Lotze said there has not been any decision made and papers on this and other issues are “being addressed” and have been posted on the Fund's external website.
“We anticipate posting a draft version of the whole Manual for world-wide comment within the next two months,” said Lotze.
Ryan told RI today that the public stance by the IMF press officer is in direct contrast to what was posted by the Reserve Asset Committee (RESTEG) as a concluded issue for them from their October meeting in Frankfurt, Germany.
“I have been told directly by members of the Reserve Asset team that the only issues left are to decide how to implement the change and allow public comment.”
Within the meeting notes of the “Nineteenth Meeting of the IMF Committee on Balance of Payments Statistics,” Ryan pointed to a list of concluded issues beginning on page 4, where on page 7, No. 27, it reads: “In this treatment, unallocated gold accounts held with residents (such as bullion banks) are excluded from reserve assets.”
“As you can see in the paper, the issues on changes to gold lending as far as the IMF RESTEG Committee is concerned is a concluded issue,” he said.
But according to the IMF, consultations are still on-going and this is just a summary of outcomes. On page 19 of the document, the IMF states:
“There was a clear majority in favor of maintaining the current treatment of monetary gold. Further consultation with Committee members is needed on unallocated gold accounts held by monetary authorities (paragraph 27 of the paper). This issue will involve further consultation with Committee members.”
But Ryan said the committee has made its conclusions and is continuing to work on how to implement, not if to implement.
“This is where I think the disconnect exists with the press officer and the committee,” he said.
IMF has laid out many of the issues on gold loans and gold deposits prepared for the technical expert group on reserves in a paper, entitled “Treatment of Allocated/Unallocated Gold Held as Reserve Assets and Gold Swaps and Gold Deposits.”
The latest full-scale review of the manual began in 2005 and is scheduled for full implementation in 2008.
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