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Central Bank Bullion Policies - The Deutsche Bundesbank

Deutsche Bundesbank acts as the central bank of Germany by holding the country's vast gold reserves. In fact, with its gold holdings now standing at a whopping 3381 tonnes, the Deutsche Bundesbank has the second largest gold holdings in the world. Outside of Germany, it stores its gold reserves in three other locations, i.e., in New York, London, and Paris.

But recently, The Deutsche Bundesbank got the attention of international media because of its controversial policies and lack of transparency regarding its gold reserves. Let’s take a brief look at the recent chain of events that drove the recent famous repatriation of gold by the German Bank.

The 2011 gold reserves report:

The government of Germany actually owns the gold held by the Deutsche Bundesbank; the Bank only acts upon the state's orders to manage this gold reserve. It has partnered with four banks worldwide to store the gold offshore.

At the end of 2011, the Bundesbank had a total of 3396 tonnes of gold, but all of it was not physically present in Germany. 31% of it was in the country, 45% was stored by the Federal Reserve Bank in New York, 11% in Paris (Banque De France) and 13% in the Bank of England, London.

One year later (in 2012) the banks’ gold reserves were 3391 tonnes because 5 tonnes were used by the German government to make gold coins. All other holdings remained untouched.

The storage controversy:

Just like many other government policies, the offshore storage plan of the Deutsche bank faced a huge criticism, and there was hug support in public opinion to repatriate the gold back to Germany. 

 Further investigation by the Federal Court of Auditors of Germany raised further questions. The Court of Auditors showed concerns regarding the transparency and security of the German gold reserves overseas. The Court is a completely independent institution powered by the federal laws of Germany. It oversees the financial matters of the country to ensure transparency.

The Federal Court held a confidential audit of the Bundesbank and presented a final report to the Bundestag, the finance committee of the German Parliament. In a part of that report that later became public, we can surely see that the Court was not happy with how the Bank relied merely on the annual reports and failed to physically audit of its gold reserves.

An enforced repatriation plan:

Following the report by the Federal Court of Auditors and a sudden decline in its popularity, the Deutsche Bundesbank later announced a repatriation plan to bring the gold back home. It also agreed to audit its gold reserves and tried to defend its past mistakes.

On October 22, 2012, The Bundesbank planned to transport 50 tonnes of gold from the New York bank back into Germany each year for 3 consecutive years (thus 150 tonnes in total).

A plan B:

In 2013, one year after the announcement of repatriation plan, The Deutsche bank announced a new plan which included the repatriation of gold from New York and Italy to increase the gold holdings in the Bundesbank Frankfurt branch to 50% by 2020. Although the recovery was slow at first, it quickly gained pace and the process was completed in 2017, well ahead of schedule.

The gold bullion that was repatriated from New York was not up to European market standards. Thus, it was melted and turned into pure gold (investment grade) by the German authorities.

The Incomplete Gold Bar lists:

The inability of the Bundesbank to answer any questions regarding its transparency and controversial policies is not a new thing. The German bank failed to provide any standard or reliable information about the number of gold bars repatriated.

In 2015, the bank issued a statement regarding its gold reserves.  The statement contained only superficial information and lacked any industry standard figures such as the serial numbers of bars, the refiner brand or the manufacturing year. The bank continues to remain opaque regarding the details of its gold holdings. However, it is certain that Germany has repatriated a large quantity of the yellow metal back home.