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Johnson Matthey Bankers Limited
The following brief historical notes help to explain some of our reticence about recommending gold storage or unallocated gold accounts.

  • Johnson Matthey were founded in 1817.
    In the 1960's, when we first thought about offering gold storage or accounts, we would probably have sub-contracted the storage to Johnson Matthey Bankers Limited. Although they were a were a blue chip public company, a member of the exclusive London gold pool, and a substantial, long established and reputable merchant bank, they caused a banking crisis in 1984, when they would have gone bust, if the Bank of England had not launched its famous "lifeboat". If we had got large amounts of customers' gold in storage, then JM may well have taken us with them. With hindsight, we are glad we did not offer storage then, and are happy if it makes us cautious now.
  • Matthey were, as we say, a reputable bank. New schemes have recently been launched offering gold accounts. We have not had the time or inclination to research the people behind these schemes, but we would not be surprised if holders of these accounts came to grief. We would strongly suggest checking what guarantees exist in such schemes, and who the people are behind them.

    One particularly dramatic and illustrative case is that of Johnson Matthey Bankers in the UK, since it prompted major changes in the UK bank supervisory system.

    Johnson Matthey Bankers (JMB), a subsidiary of the Johnson Matthey Group, was an active London market-maker in gold bullion. With the decline of trading activities in the metals market in the early 1980s, JMB compensated for its diminishing trading profits in gold bullion by expanding its other lines of business, particularly commercial lending. As a result, from 1982 to 1984, JMB's assets other than gold doubled in size, while its capital grew by less than half. The loan portfolio grew from less than one third to over four-fifths of total footings by year-end 1983.

    Ultimately a severe deterioration in asset quality led to insolvency. By 1984 JMB was apparently already experiencing financial difficulties; in addition to a decline in profits by nearly two-thirds due to growing loan loss provisions, exposures to the two largest commercial borrowers accounted for about 115% of JMB's capital base.

    When the Bank of England learned of the situation, it was already too late to organize a rescue package. By Sunday night September 30, it was clear that a private acquisition of JMB would not occur and the Bank of England decided to take control of JMB. Had this bank be allowed to fail the four other bullion dealers would have been forced to line up with other creditors to recover their cash and bullion deposits held at the insolvent institution, a situation that would have caused loss of confidence in the London gold market.

    The JMB affair pushed forward major changes in the supervisory and legal framework, which were incorporated in the Banking Act of 1987. Banks were required to disclose exposures exceeding 10% of their capital to the Bank of England and were prohibited from lending more than 25% of their capital to one borrower. Finally, the role of auditors was enhanced and their relationship with bank regulators strengthened. Similar situations have occurred in other countries:

    Johnson Matthey traces its origins to 1817, when Percival Norton Johnson set up business as a gold assayer in London. In 1851 George Matthey joined the business and its name was changed to Johnson & Matthey. The following year the firm was appointed Official Assayer & Refiner to the Bank of England.

    Johnson & Matthey's Website States:
    Gold and Silver comprises our worldwide gold and silver refining and bullion manufacturing operations. Johnson Matthey is a market leader in the refining of gold and silver. The business serves the world's mining industries and recycles secondary scrap material. Gold and silver refining operations are located in the USA, Canada and Hong Kong.

    Brief Historical Time Line of Johnson Matthey

    Storing Your Gold Securely

  • Johnson Matthey 100 Gram Refiners Assayers Gold Bar

    Johnson Matthey 100 Gram Refiners Assayers Gold Bar

    Johnson Matthey Gold Bars

    Half Sovereigns

    100 Gram Johnson Matthey Gold Bar

    100 Gram Johnson Matthey Gold Bar

    British Gold Sovereign

     


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