The LBMA Good Delivery Lists

How did the LBMA’s Good Delivery Lists develop?

Before the LBMA was established in 1987, the Gold and Silver Lists were under the control of the two companies that were responsible for the London fixing prices, the London Gold Market and the London Silver Market. These companies included some but not all of the banks currently offering clearing services in the London market. After the formation of the LBMA, it was agreed that it should have the responsibility for maintaining the Good Delivery Lists.

These Lists include all those refiners whose gold and silver bars are acceptable in London “as is” – meaning that there is, in general, no need for these bars to be check-assayed before being accepted into the loco London clearing system, and that they are accepted without any discount to prevailing market prices. The importance of the Lists extends well beyond the loco London market: other markets cross-refer to them. While this may not necessarily have the express approval of the LBMA, we appreciate the endorsement such cross-referencing represents. I think it is fair to say that the reason that other markets refer to the LBMA Lists is that our application and testing procedures are known to be extremely strict.

Have the criteria used in the assessment of new applications for the Good Delivery Lists been modified over the years?

The basic commercial, operating and technical criteria have hardly changed over the past decade, although with increasingly strict compliance requirements coming into force over recent years, there has inevitably been an increase in the documentation required to satisfy compliance officers.

Just over two years ago, a major change was introduced in the assessment procedure to facilitate the application process – without in any way reducing the stringency of the testing procedure. In the past, the first stage of the assessment involved the testing of an applicant’s bars. We often found that refiners were able to submit bars of good quality and high grade, such as a fineness of 999.9.

However, all applicants must also be able to assay accurately across a wider range of gold and silver contents (from a fineness of 995.0 and 999.0 respectively to an upper limit of 999.9).We found that assaying the reference samples provided by the LBMA was in fact the more difficult part of the technical assessment and proved the main reason for failure. Therefore, to avoid the trouble and expense to both the applicants – and the LBMA – of having the bars tested, only to fail the assay test, we reversed the procedure so that the samples must be assayed successfully before bars are submitted for testing. If an applicant fails the assay test, it is, in general, not simply allowed to try again without having first demonstrated that it has taken measures to improve the standards in its assaying laboratory.

What steps have previously been taken to monitor the refiners on the Good Delivery Lists?

The LBMA started monitoring in 1997 by means of a questionnaire asking for information about production, changes in ownership, management and other aspects of the operation. Where production had fallen to levels well below the minimum criteria, companies then were either transferred to the former list or had to undergo a full or partial technical assessment.

What happens when a refinery is transferred to the former list?

All bars produced by the refinery prior to the effective date of transfer are still Good Delivery and therefore acceptable in London. Bars produced after that date are not Good Delivery and may be accepted only after assay and perhaps at a discount to prevailing prices.

Why has the LBMA decided to introduce a more proactive form of monitoring?

The LBMA has always taken its duty of care of the Good Delivery Lists very seriously, recognising that these lists have an international dimension that extends well past the London market. Consumers throughout the world are entitled to expect that Good Delivery bars will meet the LBMA’s standards – or in the very rare cases where they do not, that the refiners will stand behind them and take appropriate corrective action.

The Physical Committee of the LBMA therefore decided last year that it would be appropriate to introduce a system of technical monitoring, to be carried out on a rolling basis such that every refiner on the list would be monitored at least once every three years.

Given that Good Delivery bars are in constant use in markets around the world and the number of complaints from consumers about them is extremely small, we don’t expect this new monitoring system to reveal any significant problems. However, its introduction further demonstrates how seriously we take our responsibility towards the Lists. Another reason for the decision is that not all the refiners on the Lists have gone through the current technical assessment procedure – a number were grandfathered into the Lists when the LBMA was founded. In some cases, it has been many years since they were first assessed by the LBMA’s predecessors. Some of these refiners’ bars are in fact rarely seen in the London market – another reason for introducing this technical monitoring.

What method of monitoring will be used? A number of different approaches were considered over the past year. We could have asked refiners to submit bars for testing or to assay sets of reference samples supplied by the LBMA, but neither of these alone would have been totally satisfactory. In addition, we did not feel that it would be appropriate to ask refiners, in effect, to submit to a full reapplication for listing.

We decided on the method of requesting each refiner to provide a dip sample and a subsequent assay which, when compared with assays of the same sample performed by two of the LBMA’s independent referees, will allow an assessment of both the production process and the assaying competence of the laboratory. The overall process is carefully specified so as to be fair and reasonable. There are procedures which will be followed in cases where the first comparison of assays shows an unacceptable divergence between the assays of the refiner and the referees. The LBMA reserves the right to ask refiners to submit to a full new testing procedure if there are doubts about the accuracy of the assays provided for the dip samples.

I understand that the panel of independent referees has been expanded from the current two. Why?

In recent years, we have been looking at ways of expanding the panel, for instance by using commercial assayers or assay offices, but we decided that the most appropriate route was to appoint a number of well-established Good Delivery refiners as referees. The companies selected have the necessary experience, technical ability and laboratory facilities to enable them to manufacture reference samples to the very high standards of homogeneity required for testing Good Delivery applicants and also to assay the dip samples provided as part of the monitoring process.

Having more referees will bring many advantages. It will reflect the international nature of the market. And clearly, the burden of the work can be shared more widely, but more importantly, in future, all technical assessments – whether for testing new applicants or as part of the proactive monitoring – will be carried out on a double-blind basis. Neither the refiners being tested nor the referees doing the testing will know the identity of the other parties concerned.

The LBMA will shortly announce the appointment of the new referees. During the coming months, a lot of work will be done to produce new reference samples and to have these cross-checked to very high levels of accuracy. Only then will the actual proactive monitoring commence.

The administration of the new system and the testing it involves will increase costs. How will these be funded?

We believe it is appropriate that all refiners on the Good Delivery Lists who are not already Members or Associates should consider applying to join the LBMA rather than merely remaining on the Lists. The £2,000 annual fee for an Associate will cover the cost of proactive monitoring – as well as the other benefits Associates enjoy. Those refiners that do not wish to join will be able to remain on the Lists upon payment of an annual maintenance fee of £700 per metal.

What is the time scale for the introduction of proactive monitoring?

We hope to be requesting the first dip samples in the middle of this year, and then have a rolling programme. The first companies to be asked will either be those that were grandfathered into the Lists or those that have had recent significant changes in ownership or operation.