Swiss banking giants UBS and Credit Suisse have raised fees on unallocated gold deposits in their vaults, and are encouraging large gold depositors to take ownership of their bullion. Swiss banks are under pressure from regulators to shrink their balance sheets, and pushing large clients such as other banks and hedge funds to take ownership of their gold is one avenue they are pursuing towards this goal.
Banks store gold either in unallocated accounts or allocated accounts. Unallocated gold accounts are stored in one giant pool, with no-one’s gold kept separate. This has traditionally been cheaper for depositors than having their actual bars stored separately in allocated accounts, but unallocated gold is shown on the banks’ balance sheets. Gold in allocated accounts are kept separate and the individual bars are tracked. Gold in allocated accounts is not shown on the balance sheet, since the bank is only acting as a storage facility, not taking the gold as a deposit.
The banks are lowering their fees for allocated storage, as further enticement for depositors to make the move. This new policy is not expected to generate much resistance, due to the increasing preference of some to store their gold in allocated accounts. Although fees for allocated accounts are higher, they provide security that unallocated accounts do not. If a bank were to fail, customers with unallocated gold accounts could possibly lose their holdings. Since allocated gold accounts are not on the banks’ balance sheet, they would be safe.