The Precious Metals Holdings of Chinese Commercial Banks
31 Pages Posted: 19 Sep 2019
Date Written: September 12, 2019
Despite gold having no official role in the global monetary system, major central banks still hold large gold reserves and emerging country central banks such as the Peoples Bank of China (PBOC) have significantly increased their gold holdings in recent years. Interestingly, Chinese commercial banks have increased their gold and precious metals holdings by even more than the PBOC. This paper exploits the relative transparency of Chinese commercial banks’ precious metals holdings and gold import licenses and finds that the holdings improve bank resilience, increase trading income and reduce interbank connectedness. The results provide first evidence for the special role of gold from a commercial bank’s perspective.
Keywords: gold, China, commercial banks, import licenses, gold swaps, BIS, trading income, interconnectedness, systemic risk
JEL Classification: G11, G15, G21, G28
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