BdF - Managing Gold as a Central Bank

Source: http://www.lbma.org.uk/assets/Gautier%2020130930.pdf

Alexandre Gautier
Director of Market Operations Department, Banque de France

III. Gold and Banque de France Asset Allocation
1. A Changing Environment Long Before the Crisis
An important point from a Banque de France and probably Eurosystem perspective is to be really aware that we have been in a changing environment for many, many years and I would just like to focus on a few points:
(M: Yes, it is known we are going off the USD as the only reserve currency IMS)
 Due to the Eurosystem, the European Central Bank has its own FX reserves. This means that in case of intervention we will first use ECB reserves and then the FX reserves of the national central banks. This is why we do not have the same liquidity constraint, so it was also an important evolution.
(M: explains also why ECB has a veto on member state reserves, other member states assets are not harmonized so for better eficiency it has to be this way)
 Under pressure from the public and shareholders, we have to move in a more efficient way to manage the Bank and a way to do this is to reduce cost, but another way is to increase income.
(M: appologises to soften poblic opinion that gold was sold in past at lower prices)
 Due to the functioning of the Eurosystem, we have regular meetings of national central banks where we discuss many topics in market operations and, of course, financial instruments. When you want to introduce, for example, futures or options, you will probably find another central bank within the Eurosystem that already has this instrument among their available financial instruments. Therefore, it helps you to implement new financial instruments.
(M: Gold policy is a shared and coordinated issue)
 When we recruit people from university, they all have a minimum background in finance and are all fully aware of the asset allocation process and so on, meaning that it is also a help for us to move towards better allocation of our assets.
 The question of IT systems was a big issue in our case. We also need up to date IT systems to be able to move towards more diversification.
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H/T to DP ‏@darenpa72