: Banking Risk
Banking Risk
Despite years of central bank support and headline-making bailouts in 2008 and 2020, commercial banks face a myriad of ongoing operational and structural risks.
The Derivatives Market— A Ticking Time-Bomb Forefront among these risks is bank exposure to a now irrationally over-valued derivatives market. The notional value of this market is far greater than a quadrillion-dollars. Banks face massive counter-party and concentration risk in this inflated sector. Dangerous price swings in sovereign bonds have been equally disruptive to the value of bank balance sheets, prompting the recent and future failure of more regional banks and hence greater consolidation, as well as centralisation, among the larger banks. Ultimately, central banks, and CBDC, will replace traditional banking and cash practices, as well as personal privacy. Holding Gold in Banks Invites Counter-Party Risk Investors bracing for any and all macro eventualities recognize that holding physical gold within such banks (or ETF “paper gold” held at these institutions) invites far too much operational and counter-party risk. Physical gold held in the banking system, even in segregated or specially allocated accounts, is vulnerable to inherent counter-party risk. In the event banks or their intermediary custodians or managers ever experience illiquidity or other structural failure, client gold is compromised. In such circumstances, investors would find themselves standing in line as second priority holders rather than direct owners of their own precious metal assets. In short, it’s not just cash deposits which are at risk during a bank “run;” one’s precious metals are equally vulnerable.