Gold often overlooked as form of collateral

MOST Asia-Pacific banks have successfully implemented the safeguards mandated by the G-20 after the financial crisis, and are compliant with the new rules regarding financial solvency.

However, one consequence of the enactment of Basel III / Dodd Frank / Markets in Financial Instruments Directive regulations and other prudential and regulatory standards has been an increase in the cost of collateral assets mandated to support the higher capital charges for banks.

The rising cost of collateral assets limits the ability and capacity of banks to participate in financial markets, extend new credit and take on new financing obligations. Consequently, countries where major institutions are adhering to these new rules could experience a decrease in market liquidity and ultimately, growth. Additionally, the expected hike in US interest rates may have a negative impact on the cost of market financing in many countries.