Gold accounts beneficial for economy, posing minimum risk

Responding to a question over whether these time deposit gold accounts are ready for a sudden increase in the demand for gold, Mustafa Dereci, the division manager for marketing and product development at Kuveyt Türk, told Sunday’s Zaman that the banks also keep the physical equivalent of gold accounts in reserves, not only on the books. “Gold for each account is present, and we can deliver it to the customer when requested. If there is a sudden demand, our bank will not have hard time meeting this demand. Consequently, there are no risks for either banks or customers,” he said.

According to Dereci, the global economic slowdown caused gold to be seen as a safe haven for investors, therefore increasing demand. Especially in Turkey, demand for gold has been escalating in line with both demand in the jewelry sector and individual investment reasons. “In order to bring individuals’ ‘under the pillow’ [personally stored] savings into the economy, gold accounts have been introduced, which enabled the banks to benefit from the investments and also provide ease to customers who want to invest in gold,” he added, noting that since the beginning of 2012 Kuveyt Türk has collected two tons of gold.

Deputy Chief Executive Officer at İş Bankası Erdal Aral also stressed that gold is a well-known and common investment tool in Turkey and up until recently people used their own method of saving their gold after purchasing it. “Because of this, the savings were not kept formally in the financial system and these savings were being kept without making any contributions to the country’s economy. Lately, with the introduction of gold banking, the traditional approach to saving and the modern financial system have intersected while contributing to the development of the economy. Also, with this method the investors are able to protect their gold savings against the risk of being stolen or lost,” he stated.

Aral said the interest on time deposit gold accounts has been increasing significantly and that as of June 2012, the total volume of gold accounts has reached TL 2.6 billion. In addition, on “gold get-together days” held countrywide at his bank’s branches, large numbers of investors have deposited their gold into gold accounts, Aral said.

Selim Işıklar, a strategist at Info Investmen, explained to Sunday’s Zaman that an unexpected increase in the price of gold would be the biggest risk for the investors in gold accounts if there is not the physical equivalent of the account saved in the bank’s reserves, if the investments have been converted to Turkish lira. “I am sure the Banking Regulation and Supervision Agency [BDDK] is checking to make sure banks keep gold equivalents of the amounts in the accounts which are required by the Central Bank of Turkey. Also, banks already experienced severe losses during the country’s financial crises of 2001, making them more cautious about keeping up with the rules and regulations,” Işıklar said.

Likewise, in a phone conversation, Dr. Süleyman Yaşar, a professor of economics at İstanbul University and a columnist for the Sabah daily, underlined the importance of inspections by the BDDK to prevent any kind of fraud or wrongdoing. He further commented: “I am confident that banks have spared a share of gold and money to meet any unexpected demand from gold account holders. However, this is a great way to bring in money kept ‘under the pillow’ and help them contribute to the economy. In the past there have been difficulties experienced in the economy due to loose inspection mechanisms. I believe the BDDK has taken necessary steps to prevent such things from happening again.”

Commenting on the issue, a high-ranking representative from Garanti Bankası, which also offers gold accounts, said the number of gold account holders had reached  250,000 and that as of the end of May, the gold stock that all the banks in the sector hold stood at around 170 tons. He added: “This is a good way to add value to the savings habits of Turkish people. Banks place special importance on banking with gold because it helps the banks to create funding for loans that it offers and generally benefits the overall economy.”