IMF gold holdings are subject to its Articles of Agreement and Rules and Regulations; specifically, Article XIII Section 2(b) specifies how depository sites are designated.
In 2012, the IMF authorized on-market sales of its gold holdings and disbursed any windfall profits among members, most notably PRGT. No proceeds were used to pay for IMF operations.
What is the IMF?
The International Monetary Fund is an organization comprised of 189 nations dedicated to global financial stability. They focus on trade and sustainable economic growth through such functions as providing support to members experiencing balance-of-payments issues, conducting surveillance of member economies, and encouraging international monetary cooperation.
IMF maintains gold depositories in New York, London, Paris and Shanghai that allow its members to place initial quota payments without being told which particular depository it will use.
In addition to gold, the IMF also holds securities and loans. The major shareholders–United States, Japan, Germany, China, Russia and the UK–hold approximately one-third of IMF gold reserves.
The IMF is administered by its Board of Governors, consisting of one representative for every country that belongs. Most significant powers, however, rest with its Executive Board of 24 members led by Christine Lagarde as its Managing Director – but other rules, regulations and by-laws govern its daily operations as well.
How does the IMF manage its gold holdings?
Gold holdings provide the IMF with significant strength, acting as a major backstop against creditor claims and helping support low-interest concessional lending capacity for low-income countries through its Poverty Reduction and Growth Trust. Proceeds from sale of smaller amounts can also supplement these resources.
Under a 1978 amendment to its Articles, the IMF may only sell or transfer gold on market terms with current market prices in mind. Furthermore, accepting it in discharge of members’ debt obligations requires approval by an 85 percent majority of total voting power.
In the past, the IMF sold some of its gold to cover costs and finance its transition towards an income model less dependent on lending revenues. When selling gold in 2010 and 2011, the Fund made sure its sales did not cause disruptions to the gold market and were consistent with guidelines established by its Executive Board.
What are the IMF’s gold depositories?
IMF gold reserves are housed at various depositories throughout the world. These “gold depositories” are officially known by their official name:
At an Executive Board meeting prior to ratification of the Fund’s Articles of Agreement in 1946, Gijsbert Bruins representing South Africa and the Netherlands raised Shanghai as one of five depository locations alongside New York, London and Paris; however, this idea never materialised and neither depository took shape in Shanghai.
Current storage locations of IMF gold include the Federal Reserve Bank of New York, Banque de France, Bank of England, and Reserve Bank of India; its future storage location remains unclear under Rule F-1; one IMF staff document from 1956 seemed to imply otherwise). Gold’s role has gradually diminished since the collapse of Bretton Woods system but remains an integral part of many countries’ foreign reserves.
How do the IMF’s gold depositories work?
At its founding in 1944, Members paid 25 percent of initial quota subscriptions and subsequent increases with gold. Furthermore, members used this precious metal to pay interest on IMF loans or return it as payment against currency or debt repurchase agreements.
At a 1946 Executive Board meeting just prior to adopting the Fund’s Rules and Regulations, Gijsbert Bruins representing both Netherlands and South Africa asked that one of five IMF gold depositories located in Moscow. His request was later dropped.
As central banks and official gold holdings at international storage locations gain renewed focus, it is worth exploring how the IMF’s depositories operate. Article XIII Section 2 states that gold held by its depositories shall initially be distributed at least 50:50 between New York and London.