Vast new regulations will come into effect for Banks around the world on January 1, 2022.  Known as the "Basel-3" Bank Supervision Regulations adopted by the Bank for International Settlements (BIS); these new rules will dramatically change how much Reserve Capital banks must have and how that Reserve Capital is valued and computed, in order to operate.

The changes stem from the Banking Crisis of 2008.   Too many banks failed in '07-'09 due to lending policies that did not adequately assess the risk the banks were taking when making loans.  The new rules are allegedly designed to make banks stronger and more resilient when under economic stress.

For instance, how banks are allowed to treat the value of Gold or Silver Bullion they hold, will change.  Banks holding "paper" Gold will no longer be able to use the entire value as Capital Reserves because they don't possess the physical metal.

Previously, banks could hold gold on their balance sheets in the form of unallocated paper gold contracts without holding physical gold in tangible form. These paper contracts were considered as “good as gold” when it came to determining how much capital a bank needed to maintain on its balance sheet.

Under the old rules, there was little incentive to hold physical gold, as it was only valued at 50% for reserve purposes. Basel III rules move physical gold from being considered a Tier-3 asset to being considered Tier-1, which allows physical gold in bullion form to be counted at 100% value for reserve purposes.

Gold in unallocated paper contracts will no longer be considered an equal asset. For this reason, banks using paper forms of gold to help meet reserve requirements will have to convert those positions to physical metal, or risk becoming too undercapitalized to continue to function.

There is a lot of rumor-mongering going on about this particular change, with many saying this will cause a "short squeeze" for very many banks.  Banks using paper gold will have to go out and buy metal or face a failure to meet the new  reserve requirements.  But where will the banks get the money to buy the metal?

As all the banks try to sell their paper gold contracts, the values will plummet; supply and demand.  That loss of value and loss of permission to use paper gold as "Reserves" will have to be made up, fast.

It is this prospect that has SOME people SPECULATING that banks may have to grab depositor funds as a "Bail-In" to offset the losses the banks incur.

The Depositor would lose a portion of their money, but it would be replaced by Stocks in the bank itself.  Although what anyone would do with Stocks from a Bank that needed to grab Depositor money to stay afloat, is a mystery to most people.  It is widely believed that such Bank stocks would be effectively worthless.

The thing is, these new regulations kick-in on January 1, 2022 and no one is really sure what impact, if any, this is going to have on banks worldwide.

Again, there is much rumor-mongering going on and it is not easy to discern what is truth and what is not.  

The Hal Turner Radio Show is publishing this article to remind readers this monumental Banking Regulation change is coming within about two weeks, so readers can decide if maybe they want to be holding significant amounts of cash through January, until the world sees how these new Banking Regulations pan out.

Better the cash be in your possession than in the possession of the banks, if a slew of them can't meet the new requirements and move to take Depositor funds.

Detailed Information from the Bank for International Settlements

The Basel III reforms have now been integrated into the consolidated Basel Framework, which comprises all of the current and forthcoming standards of the Basel Committee on Banking Supervision. For background, set out below are the main publications that describe the changes to the Basel Framework that were agreed as part of Basel III.

Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures aim to strengthen the regulation, supervision and risk management of banks.

Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.

Finalisation of the Basel III post-crisis regulatory reforms
Basel III: Finalising post-crisis reforms (December 2017)
Minimum capital requirements for market risk (January 2016, revised January 2019)
Liquidity Coverage Ratio (January 2013)
Net Stable Funding Ratio (October 2014)
Basel III: A global regulatory framework for more resilient banks and banking systems (revised version June 2011)
Summarised Basel III

Basel III transitional arrangements, 2017-2028

Basel III summary table

Finalising Basel III - in brief

The market risk framework - in brief

Additional material on the finalisation of the Basel III reforms
The post-crisis regulatory reforms were endorsed by the Group of Central Bank Governors and Heads of Supervision (GHOS), the Basel Committee's oversight body, on 7 December 2017. The adjustments to the market risk framework were endorsed by the GHOS on 14 January 2019. The revised standards will make banks more resilient and restore confidence in banking systems.

High-level summary of Basel III reforms
Basel III Monitoring Report - Results of the cumulative quantitative impact study
Basel III finalisation announcement news conference
Explanatory note on the minimum capital requirements for market risk
Related information
Press release: 7 December 2017
Press release: 14 January 2019
QIS - Current data collection exercises
Countercyclical capital buffer