Bloomberg reports here:
Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk-averse investors toward equities.
In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves. ...
Currency reserves among the world’s central banks climbed by $734 billion in 2012 to a record $10.9 trillion, according to data from the Washington-based International Monetary Fund. That’s about 20 percent of the $55 trillion market value of global stocks, data compiled by Bloomberg show. ...
Even so, 70 percent of the central bankers in the survey indicated that equities are “beyond the pale.”
Notice how the first paragraph calls central banks "risk-averse investors", showing that the line between investing and banking has been completely erased in the popular reporting even as the evidence of the survey shows that for most central bankers the line remains boldly drawn. Banks don't invest, they bank.
Purchases of gold by central banks in recent years is interesting in that context. While buying stocks might mean investing to central bankers, something to be shunned, buying gold is not really investing, otherwise they wouldn't have been doing so much of it.
Gold reserves in the world now total roughly 31,000 tonnes, or about $1.5 trillion if gold is $1,500 the ounce. This amounts to 13.7% of the total forex reserves of $10.9 trillion mentioned in the article. In the context of the Basel III capital rules, that's considerably more hard collateral being set aside by the folks running the show as time goes by than by the downstream bankers who protest against building up to seven, eight or nine percent capital ratios.
I'm glad central banks are buying more gold. They should do even more of it. But investing in stocks by banks, central or otherwise, isn't banking. It's gambling, especially at these levels.
Even so, 70 percent of the central bankers in the survey indicated that equities are “beyond the pale.”
Notice how the first paragraph calls central banks "risk-averse investors", showing that the line between investing and banking has been completely erased in the popular reporting even as the evidence of the survey shows that for most central bankers the line remains boldly drawn. Banks don't invest, they bank.
Purchases of gold by central banks in recent years is interesting in that context. While buying stocks might mean investing to central bankers, something to be shunned, buying gold is not really investing, otherwise they wouldn't have been doing so much of it.
Gold reserves in the world now total roughly 31,000 tonnes, or about $1.5 trillion if gold is $1,500 the ounce. This amounts to 13.7% of the total forex reserves of $10.9 trillion mentioned in the article. In the context of the Basel III capital rules, that's considerably more hard collateral being set aside by the folks running the show as time goes by than by the downstream bankers who protest against building up to seven, eight or nine percent capital ratios.
I'm glad central banks are buying more gold. They should do even more of it. But investing in stocks by banks, central or otherwise, isn't banking. It's gambling, especially at these levels.
