In the first of a new monthly feature, LBMA is publishing responses to frequently asked questions received from Members and other stakeholders. This is one of the many ways in which we are striving to be transparent in our goal to advance standards and develop market solutions.

If you have any questions on any of our initiatives, publications, events or strategic direction, please email

Here are the responses to queries we have had this month:

1) What does the suspension of the six Russian refineries mean for their bars already in vaults?

These six refiners will no longer be accepted as Good Delivery by the London Bullion market until further notice.

Following a suspension or a transfer to the Former List, the bars that the refiner produced while on the Good Delivery List – and up until suspension on March 7, 2021 – will still be considered Good Delivery. Section 1.4 of the Good Delivery Rules explains this in more detail.

The London Good Delivery List of Acceptable Refiners of gold and silver is maintained by LBMA, by whom it is copyrighted.  It lists those refineries whose gold and silver bars have been found, when originally tested, to meet the required standard for acceptability in the London Bullion market.

2) Can you briefly explain the different regulatory ‘haircuts’ and regulatory costs for gold?

Gold has different regulatory treatments depending on the purpose of the regulation. Additionally, different jurisdictions can opt to apply nuanced variances to the Basel III rules, which in turn creates different cross-border rules.

For example, when gold is used as collateral for a margin payment to a central counterparty or clearing house, the ‘haircut’ in most jurisdictions is 20%. Therefore, for every 100oz of gold you place as collateral, you can use 80oz of it towards your margin requirement. The 20oz is reserved in case of adverse price moves.

However, within the same Basel III rules for funding requirements, the same gold asset is deemed to require 85% of Required Stable Funding using a High-Quality Liquid Asset (HQLA).

Within the Liquidity Coverage Ratio rules, only an HQLA is allowed to be used to cover all outgoings of a bank during the next 30-day time horizon. Gold is not currently considered HQLA.

To add to the confusion, within the Capital Adequacy Rules of Basel III, physically allocated gold held within a bank’s own vault is considered to be “risk free” and has no haircut applied when calculating a bank’s Tier 1 capital.

3) On the subject of gold as a High-Quality Liquid Asset (HQLA), gold is treated as a junior rather than a senior asset class by prudential regulators. What are you doing about this?

LBMA continues to provide evidence and education to prudential regulatory groups in order to highlight the positive attributes of gold as an asset class.

The first example of this work was the trade reporting initiative which began in November 2018, designed to give some post-trade transparency to the market. As a result, we can now demonstrate that collectively, all global gold trading is approximately 139 billion USD average daily volume – which is more than three times the size of the European Union government bond markets. Further work needs to be done to demonstrate pre-trade price transparency and depth of market characteristics. By providing all of these elements, LBMA will be in a position to claim that gold meets all Basel III regulatory characteristics of HQLA.

4) What are the direct affects and regulatory arbitrage concerning the standardised approach to counterparty credit risk (SACCR)?

Although this is a Basel III rule, we can see that in some cases, for example the United States, the ‘Alpha Factor’ is not always an additional cost when applied to a commercial end user. This is not the case in other jurisdictions such as the European Union. So the credit calculation in the US can be more generous than in the EU.

5) Can you explain the settlement risk in non-Continuous Linked Settlement (CLS) and non-centrally cleared environments?

CLS is a regulated entity that provides a settlement methodology in which bilateral trades may be settled without payment risk. This is managed by way of pre-funded pots of cash administrated by the settlement agent CLS. Outside of a centrally settled environment, the parties to each trade must make a provision for credit to one and other in case one of the payments fails.

6) Do you have printed copies available of the Introduction to the Global Precious Metals OTC Market, or the Annual Report 2021?

These publications are now only available in electronic format on the publications section on our website.