ALEX BRUMMER: Secrets of the Bank of England’s vaults

There is much more to the Bank of England than setting interest rates. Deep in the bowels of Threadneedle Street sit the gold vaults. 

Bullion has been partly displaced by bitcoin and crypto currencies as a store of value for speculators – but for sovereign governments it remains a key reserve asset.

Britain would hold a much stronger asset base now had Gordon Brown not chosen to sell most of Britain’s gold reserves more than two decades ago when the price was at its lowest.

Gold vaults: The Bank of England is known to have in safe-keeping the reserves of as many as 30 emerging market and advanced nations

Who owns the gold in the vaults is a closely guarded secret but the Bank is known to have in safe-keeping the reserves of as many as 30 emerging market and advanced nations. 

Among those with particularly large piles are the ‘Stans’ – the Asian republics once part of the Soviet Union.

The Bank’s role as a custodian of gold means that over the years it has also held currency assets of foreign powers.

Somehow the Bank, with its rich global (better not mention colonial) history and the UK’s rule of law is seen as a good place to squirrel away assets. 

The ruling by the Supreme Court that Venezuela’s disputed leader Nicolas Maduro, who led the oil-rich nation to rack and ruin, should be denied access to £1.4billion of gold stored by the Old Lady provides a rare glimpse into this little-known aspect of the Bank’s work.

When central banks and monetary authorities buy or sell gold, often the Bank simply moves gold bars from one national pile to another, or ships it to Switzerland.

Being a bullion depository is about as far away as you can get from electronic transfers embraced by fintech newcomers such as Wise and the blockchain.

It also occasionally thrusts the Bank of England into the diplomatic spotlight. Most famously, in 1980, the release of reserves held by the Bank on behalf of the Iranian authorities to the late Ayatollah Khomeini’s regime was the final piece in the puzzle which freed US hostages in Tehran.

Secret diplomacy is widely credited with helping secure Ronald Reagan’s victory over Jimmy Carter in the presidential election.

Financial settlements often hold the key to long-standing diplomatic disputes. Currently in the courts is a disputed debt of £400million allegedly owed by Britain to Tehran, dating back to the days of the Shah, for tanks never delivered. 

It is seen as the key to the release of detained UK dual nationals such as Nazanin Zaghari-Ratcliffe.

Maybe it will be the next transfer.

Cleaning up

After a long hiatus, peppered with audit scandals, the Government has found itself a candidate to head the Financial Reporting Council (FRC).

In choosing former BT chairman Jan du Plessis, one trusts it has found a more robust candidate than predecessor, former Glaxosmithkline finance director Simon Dingemans who stepped down as chairman after just nine months in May 2020.

Du Plessis is a grown-up, having served as chairman of Rio Tinto where he presided over a £11.3billion rights issue.

He also orchestrated a £78billion sale of UK quoted brewer SAB Miller to AB Inbev in a highly leveraged deal. 

His stewardship of BT was less glittering. Having arrived determined to restore its reputation as a great infrastructure firm, he left bruised amid a falling share price and disagreements with his chosen chief executive Philip Jansen.

The task at the FRC will be to steer the regulator into a statutory body – the Audit, Reporting and Governance Authority.

Failure by the Government to find legislative time for the project implies a lack of enthusiasm amid suggestions that powers to strengthen and modernise audit could be watered down.

It will be a big test of Du Plessis’s mettle.

Crap shoot

As the incubator for much of the technology which powers sports betting, Playtech has always been a hidden gem.

One of the mysteries is why an Aussie gaming group, Aristocrat, found itself in the driving seat when much larger Las Vegas rivals stood on the sidelines. Betting on all sports is huge in Asia-Pacific.

So the emergence of gatecrashers who have surreptitiously built up a 20 per cent-plus stake in Playtech has the company and its would-be partner Aristocrat crying foul.

Odds are narrowing on a higher take-out price than the £2.1billion on the table.

This post first appeared on Dailymail.co.uk