Regulation Update

Responsible Gold Guidance (RGG)

Refiner audit reports
It has been three years since the LBMA launched its Responsible Gold Guidance (RGG). Both the refiners and auditors have worked hard during this time to understand the requirements and to ensure the LBMA RGG has been implemented successfully. The LBMA RGG extends the OECD Gold Supplement for Refiners and builds on existing Anti-Money Laundering and Know Your Customer management systems and auditing practices. It also makes what is a voluntary system (the OECD Guidance) mandatory for all LBMA Good Delivery gold refiners wishing to be accredited for the London Bullion Market. As per the RGG, all refiners have three months from the end of their financial year to submit the independent audit report to the LBMA. For most refiners, this deadline for the 2014 production is March 2015. The LBMA is continuing to receive audit reports. We are hoping that by the next edition of the Alchemist, we can report that the majority of the GoodDelivery refiners have successfully passed.

Fair Effective Markets Review
The Fair and Effective Markets Review was set up by the Chancellor and the Governor of the Bank of England on 12 June, 2014. It is a joint review chaired by the Bank of England’s Deputy Governor for Markets and Banking, Nemat (Minouche) Shafik, with Martin Wheatley (Chief Executive Officer, FCA) and Charles Roxburgh (Director General, Financial Services, HM Treasury) as co-chairs. The full consultation document, entitled ‘How fair and effective are the fixed income, foreign exchange and commodities markets?’ examines what needs to be done to reinforce confidence in the fairness and effectiveness of the Fixed Income, Currency and Commodities (FICC) markets. The precious metals markets are referred to a number of times throughout the Review. The LBMA response is available on the Bank of England website for public review.

In summary, the LBMA indicated that there was no need for further regulation but supported the need for further transparency through post-trade reporting. The LBMA also took the opportunity to describe the characteristics of the precious metals markets and the controls that exist to help the market to operate against a fair and effective framework. The Review will be able to take the existing framework into consideration before coming out with its proposals later this summer. The LBMA has welcomed the opportunity to provide further support and advice on the precious metals markets and to work closely with the Review to help implement its agenda. This all ties in very closely with the LBMA strategy which is featured in the Editorial.

Other regulatory news…

Basel III
The LBMA is working with the World Gold Council and has launched a survey for its member banks to complete. The survey is focused on getting actual data from the banks in order to defend the position that by imposing a fixed Required Funding Ration of 85%, it would have a significant impact on the banks. Gold is a unique commodity and its specific attributes should be taken into account.

Financial Conduct Authority (FCA)
Benchmark Consultation: The LBMA submitted a response to the EU on the FCA Consultation Paper (CP) on Benchmarks. The CP was focused on amending the existing FCA rules that were written for LIBOR by extending the scope to include seven additional benchmarks, which include the LBMA Silver Price and the LBMA Gold Price. The CP drew a distinction between benchmarks that had submitters and therefore needed to be regulated directly, and those benchmarks that had non-submitters and therefore did not need to be regulated. The LBMA in its reply asked for further clarity on the proposal under the CP.