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Planned bullion bank may entail financial system risk, experts warn
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An employee shows two gold bars produced by state-owned diversified mining company PT Aneka Tambang (Antam). (kompas.com/Garry Andrew Lotulung)
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new bill currently being deliberated looks set to legalize bullion bank services in the country, but experts warn such a step may carry risks for the country’s financial system and are urging the authorities to set up measures to contain the risks.
The rules on bullion banking were proposed by the government to be included in the broader financial sector development and strengthening (PPSK) omnibus bill initially drafted by the House of Representatives.
The rules would allow for various bullion services involving gold, namely saving, safe deposits, loans and trading, as well as over-the-counter (OTC) exchange, derivative trading and securitization, all of which would be subject to banking law and supervised by the Financial Services Authority (OJK).
Finance Minister Sri Mulyani Indrawati explained on Nov. 10 that the general concept would be similar to regular banking, but using gold instead of banknotes. She argued that, if one day more people sought to build savings in the form of gold, that should be accommodated.
However, experts have told The Jakarta Post that having banks offer bullion services may not be wise.
Doddy Ariefianto, associate head of the finance program at Binus University, said customers may confuse bullion services with savings and time deposits, falsely assuming that all of them offer stable and guaranteed returns simply because they were all provided by banks.
He noted that gold tended to fluctuate and that its price may rise during times of heightened uncertainty but fall when the situation reverted to normal, earning it the title of a safe-haven asset, rather than a safe asset that offered guaranteed returns.
