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