Question
Under Article 134(4) CRR, what would the risk weight be if gold bullion is held on our behalf by other institutions and where such investment is not backed by gold bullion liabilities?
Background on the question
Pursuant to Article 134(4) CRR, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities shall be assigned a 0 % risk weight.
Answer
In accordance with Article 134 (4) of the Regulation No 575/2013 (“CRR”), gold bullion, whether held in own vaults or on an allocated basis, is subject to a 0% risk weight only to the extent that it is backed by bullion liabilities. Where the conditions in Article 134(4) CRR for a 0% are not met, it constitutes an exposure to the entity holding the gold bullion and consequently the risk weight to be applied is that for a delivery obligation of the other entity on this gold bullion. This answer is without prejudice to the application of market risk capital requirements for gold in accordance with Article 92(3)(c) CRR.