“We have been in discussions with the Federal Reserve Bank of New York about the Bundesbank’s holdings of gold,” the Bundesbank said yesterday in a letter to the German parliament’s budget committee. “The discussions have been fruitful and the Federal Reserve has expressed a commitment to work with the Bundesbank to explore ways to address the audit observations, consistent with its own security and control processes and logistical constraints.”
The agreement is part of a compromise between the German central bank and the Audit Court, which has called on the Bundesbank to take stock of its gold holdings outside Germany, saying it has never verified their existence.
The Bundesbank distributed the letter to reporters after board member Carl-Ludwig Thiele and the Audit Court’s head Dieter Engels testified to budget committee lawmakers in the lower house of parliament in Berlin.
The Frankfurt-based central bank on Oct. 23 issued a statement saying that “the Bundesbank and the Federal Court of Auditors have different opinions” on the matter. The central bank manages Germany’s gold reserves, which amounted to 3,396 tons as of Dec. 31, 2011. The gold is kept at central bank vaults in Frankfurt, New York, Paris and London.
The New York Fed held the largest share of reserves at the end of 2011, or 45.2 percent with a value of 60.1 billion euros ($78 billion), according to a statement sent to the German parliament. The Bundesbank held 30.5 percent, worth 40.5 billion euros, in Frankfurt.
Engels told reporters “we’ve found a compromise” on the matter, adding he’s “very” reassured after the meeting. It makes no sense to fight over details that are controversial even among legal experts, he said.
“We’re in negotiations with our partner central banks to develop auditing rights, and that’s been agreed in principle,” said Thiele. “In parallel, we will, over the next three years, transfer 50 tons of gold each year from New York to Frankfurt, which is an additional way to create confidence.”
The Bundesbank is grateful that its partner central banks were willing during the Cold War to guard German gold and make sure it’s available to Germany even in times of tension, Thiele said. The legal disagreement with the audit court has been overcome through “practical action,” he said.
Engels said the Audit Court “had no doubts about our American partners, at no point in time. For us it’s a question of regularity and how we’ll proceed in the future.”
Norbert Barthle, budget spokesman for Chancellor Angela Merkel’s Christian Union bloc said he has “full trust in the German Bundesbank and are sure that the German gold reserves are safely stocked in the U.S., France and London.” The Union welcomes the Bundesbank’s decision to “bring back to Germany and examine part of the gold,” he said.
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