Reserve Bank of Australia Audits Our Gold Reserves

Gold Bars Stored at the Bank of England

Two years ago the news was publicly broken on this site that 99.9% of Australia's Gold reserves are stored by the Bank of England in the United Kingdom. Attempts by another blogger, interested in the whereabouts of Australia's Gold, had been rejected by the RBA only several months earlier, "The Bank does not publish the location of its gold reserves."

Decisions like this don't happen in a black hole. Something changed the RBA's mind, between August 2012 and December 2012, on making the location of Australia's Gold reserves public.

From my observation, the RBA tends to follow the lead of other Central Banks, so the decision to release information on the location of Australia's Gold may have been a result of Germany's Central Bank (Deutsche Bundesbank) deciding to do so in October 2012 (interview containing the information originally released is no longer published on the site, but available via Web Archive). Only a month later, in November 2012, the Austrian Central Bank released the location of their Gold reserves, revealing that 80% resided in the UK, 3% in Switzerland and 17% in Austria. Cue the RBA feeling comfortable to release the location details of Australia's Gold around 1 month later.

A recent experience of mine with the RBA further highlighted their desire to follow in the footsteps of other Central Banks rather than to think for themselves. An FOI request I made for the Gold bar list was initially rejected, but after lodging an appeal with the OAIC, highlighting that the United States published a list of their Gold bars details (sans the serial number), the RBA decided to follow suit (Reserve Bank of Australia Releases Gold Bar Details).

Earlier this year I spotted a line in the RBA's annual report indicating an audit had been performed (not something I have seen mentioned in previous years):

A question posed by email to the RBA earlier in the year suggested that RBA officials had performed the audit themselves.

I decided to lodge another FOI request.

"I request that a copy of the following documents be provided to me: All documents pertaining to the audit of the RBA's gold holdings performed during the 2013/14 financial year, as was specified in the 'Operations in Financial Markets' section of the Reserve Bank of Australia Annual Report 2014 ("During the year in review, the Bank audited its gold holdings")."

Two months later (decision on the documents was delayed due to consultation with the Bank of England) I received the following list of documents that would be provided (on payment of fees, which were reduced from an original quote due to the small number of documents that could be released):

And today the documents arrived. Here's what we know...

In February 2013, the Assistant Governor (Financial Markets) requested Audit Department include in its audit program a review of the Bank’s gold holdings at the Bank of England (BoE). The Chief Representative in EU approached the BoE to facilitate this review and in late May 2013 initial planning discussions were held with BoE staff with tentative agreement that the review would take place in September 2013.

The audit included:

• An on-site physical verification commencing 23 September 2013, which will take 4-5 days to complete, assuming two RBA auditors are involved given the proposed scope.
• Inspecting a sample of RBA Gold bars (list to be provided in advance), including checking the details of these bars against the Bank’s inventory list and weighing of the bars by BoE staff using their equipment.
• Randomly selecting additional Gold bars from the inventory list and observing these bars being located and retrieved from their vault (plus verifying the details and weighing them).
• Obtain a high level understanding of the BoE gold safe custody service.
• Continuing discussions for a comprehensive safe custody agreement between the RBA and BoE.

As the above document list shows, those relating to final audit results were not provided. I would assume the audit was successful, but no doubt that would be a highly contested opinion in the Gold blogosphere. The following reason was provided for denying access to the report:

Documents 10, 11 and 12 are drafts of the report prepared by the RBA’s Audit Department detailing the findings of the audit and document 13 is the final of that report.

Denial of access to these four documents in terms of s33(a)(iii) is appropriate because release of the information (which relates to procedures for the conduct of the audit with the BoE and the subsequent results) ‘would, or could reasonably be expected to, cause damage to’ the relationship between the RBA and the BoE.  This belief is soundly held by us on the basis that we are aware that the BoE provides safe custody services not only to the RBA, but also to other central banks around the world.  Disclosure of the information in these documents could damage the relationship between the BoE and its other central bank clients, and by extension (as the source of the information), the relationship between the BoE and RBA.  As foreshadowed to you in earlier correspondence, we consulted with the BoE in relation to these documents and they affirmed the views we held regarding the damage that would be done to the relationship between the BoE and RBA if the redacted information were disclosed.

Denial of access to these four documents is also appropriate in terms of s47E(a) (‘disclosure would, or could be reasonably expected to, prejudice the effectiveness of procedures or methods for the conduct of tests, examinations or audits’ by the Bank) and (b) (‘disclosure would, or could be reasonably expected to, prejudice the attainment of the objects of particular tests, examinations or audits conducted, or to be conducted’, by the Bank).  The documents in question concern the ‘procedures and methods’ within both the RBA and the BoE regarding the conduct of the physical check of a sample of gold bars (for the purpose of conducting the audit).  Disclosure of this information would, of course, reveal those procedures and methods, and by logical extension render them less effective. Also, the ability of the Bank to attain the objects of the audit (which is to reveal whether the Bank’s arrangements are robust and secure) would be prejudiced. These considerations apply to both the audit currently the subject of your FOI request and also any other audits undertaken by the RBA. A key requirement for undertaking a successful audit (of any aspect of the RBA’s work) is that there is as little opportunity as possible for individuals to take steps to predict what an auditor may choose to focus on, and/or how they will conduct the audit. It is self-evident that if such procedures and methods are revealed, then the opportunity to circumvent them is greatly increased.  As s47E is a public interest conditional exemption, I must take into account whether the giving of access is in the general public interest (in terms of s11A(5)).  When deciding whether access is in the public interest, I must take into account the following from s11B(3) and have noted my views in each case:

Section 11B(3) factors favouring access to the document in the public interest include whether access to the document would do any of the following:

(a) promote the objects of this Act (including all the matters set out in sections 3 and 3A); release would be contrary to some sections, particularly sections 2(a) and 3(3)

(b) inform debate on a matter of public importance; the Bank’s gold holdings, while important and of interest to some, are not a matter of public importance generating any level of debate

(c) promote effective oversight of public expenditure; release of the information would not do this

(d) allow a person to access his or her own personal information; the request is not seeking personal information.

Taking into account these factors, and the implications release of the information would have on the Bank’s audit processes, I have decided that it is clearly not in the public interest to disclose the information in these four documents (10, 11, 12 and 13).  Disclosure of these documents would manifestly harm the public interest by way of reducing the ability of the RBA to successfully conduct audits and tests of its operations going forward.

The released documents (mostly a chain of various emails) also suggested the RBA have been invited back for another review in 12 months.

One interesting point from the documents, the Bank of England was emailing clients in June 2013 (those for whom they're providing custodial services) inviting them to audit samples of their Gold:

Click Above Text To Enlarge

However discussions on the RBA audit were already well advanced at that time.

Given that the RBA has followed the lead of other countries to release reserve location details, perform audits and release (some) bar list details, it will be interesting to see whether they go further and follow the lead of the many countries now deciding to repatriate some or all of their Gold reserves...

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BB.

Reserve Bank of Australia Releases Gold Bar Details

A few months ago I wrote about an FOI request that I had applied for with the Reserve Bank of Australia (RBA):

BoE Tells RBA: Don't Release Gold Bar Details (FOI)

It had been rejected based on the Bank of England (BoE) claiming the information was confidential, the RBA used this response to suggest that release of the information would cause damage to the international relations of the Commonwealth.

I lodged an appeal with the OAIC (as recommended by Peter Timmins of Open and Shut) and it was successful (mostly, as explained further down).

The argument for review of the decision was as follows:

My request for a list identifying the gold bars that form Australia’s 80 tonnes gold reserves was denied on the basis that it would divulge information shared in confidence between a foreign government (or authority of) and Government of the Commonwealth (or authority of), however the custody arrangement of Australia’s Gold between the Reserve Bank of Australia (RBA) and the Bank of England (BoE) is purely a commercial relationship, rather than a governmental relationship. Furthermore the RBA has revealed to multiple individuals via general enquiry that “at 30 June 2011, 99.9% of the gold is held in the United Kingdom, at the Bank of England”, which is inconsistent with the exemption claim that correspondence between the RBA and the BoE regarding their commercial custody arrangement is confidential. Given that the RBA has openly revealed the location of the gold, further to the total physical amount, there is no reason to expect that revealing the physical properties of the bars would in any way risk the security of the asset.

Releasing the document/s requested is in the matter of the public interest. How can the BoE restrict the ability of the RBA to comply with a valid FOI request regarding a matter of public interest in the stewardship by the RBA of the Australian public’s gold?

The US Government has published a bar list of deep storage gold reserves in the matter of transparency and public interest and I think it’s a reasonable expectation that Australia follows this lead in order to allay any fears of the public, proving that the gold is there and physically accounted for.

The review process took some time, it was around 7 weeks from initial contact with the OAIC to this point.

I'm pleased to inform readers that upon reconsideration (the RBA contacted the BoE again in relation to the request), details of the bars have been released (minus the serial number). The FOI Officer provided this reasoning on retaining confidentiality of the serial number:

We are in a position to release to you melter/assayer, gross weight, assay and fine weight information relating to the bars in the inventory.  The only information we will withhold from release are the individual bar numbers, as this information remains confidential (in the opinion of both the Bank of England and the Reserve Bank of Australia). The Bank of England (as our custodian) use their own numbering system to uniquely identify each bar and have reaffirmed to us that these numbers should not be disclosed to third parties as the information is confidential.

We note that this information is broadly consistent with the example you quote in your application for review (namely the US inventory of deep storage gold reserves), although our list is not aggregated into groups of bars.

The Bank is of the view that withholding of the bar details is required, to ensure that our obligations to the Bank of England (in terms of confidentiality of their information) are maintained.  This also accords with the burdens placed on the Bank in terms of section 33(a)(iii), which exempts information the disclosure of which would, or could reasonably be expected to, cause damage to the international relations of the Bank.  Section 33(b) also exempts ‘any’ information exchanged in confidence between the Bank of England and the Reserve Bank of Australia.

You can access the file which contains the records below:

RBAFOI - Inventory of Gold holdings

Further to the bar list, Warren from Screwtape Files (who has constructed a Bullion Bars Database, the largest known public repository of historical bar lists on the internet) provided the following information showing the refiner breakdown compared with a much larger data set he has compiled from various sources:

... If a refiner is not listed in the RBA document, then it's not shown in the other columns.

(i.e. you'll note the GLD comparison will not add up to 100%, neither does the 'Universe'.)

Explanation of the other columns:

PercentageUniverse = every single gold bar we have on record (247,477)
PercentageGLDHistorical = every gold bar ever seen across 700+ GLD bar lists (157,593)
PercentageGLDCurrent = every single gold bar currently in GLD (approx 64,000 in this sample).

Basically what you can see is that the BoE composition is somewhat different.

I haven't yet checked for any direct matches for weight, fineness + refiner, but a few random checks on the Royal Mint bars were negative, it's my guess the only matches to ETF data would be coincidental (i.e. expected from statistics).

* NULL means there are no matches

Click Table To Enlarge

While it's not a complete record of each bars attributes (lacking serial number), it does confirm that Australia's Gold reserves are held in allocated form as identifiable bars (which to the best of my knowledge wasn't already publicly known). The below is a description from the IMF on allocated vs unallocated Gold (from a central bank reserve asset perspective):

Allocated gold

4. Allocated gold is gold deposited under a safe-keeping or custody arrangement. It is “a specific and uniquely numbered physical piece of gold, which remains in the ownership of the individual or institution placing it for safe custody with a bank” (paragraph 15 of Philip Turnbull, BOPTEG issues paper # 27A). The owner of allocated gold keeps legal ownership over the allocated gold even if it is deposited with a custodial facility provider. In the economic system, it remains an asset without a counterpart liability.

Unallocated gold

5. Unallocated gold represents a claim on a fixed quantity of gold. “Account providers hold title to a reserve base of physical (allocated) gold and issue claims to account holders denominated in unallocated gold. The account holder does not hold title to physical gold but instead holds an unsecured claim against the account provider, in effect a deposit with the account provider” (paragraph 13 of Chris Wright and Stuart Brown, issues paper for the fourth AEG meeting). The account holder does not have legal ownership of the physical gold but is an unsecured depositor. The account holder is a creditor to the account provider, and so in the economic system this asset has a counterpart liability. Unallocated gold targets the professional gold market.

6. In many cases, similar to deposits, an account holder of unallocated gold account deposits its physical gold to its account provided by, for instance, a bullion bank. Then, the account holder undertakes gold transactions (outright purchase/sale, gold swaps, and gold deposits) via the account. But specific gold bars are not ascribed to the holder unless the holder takes delivery of the gold. The bullion bank can use the deposited physical gold for its own trading purpose and so does not necessarily have 100 percent backing in physical gold for the unallocated gold accounts.

A positive result from the OAIC review which I will be closing (despite the lack of serial number). Unfortunately the process for such a review will become more difficult in the near future due to the government announcing that the OAIC will be abolished. Peter Timmins wrote about the issue when first announced in the budget:

The changes wipe the review model adopted in the reform package of 2010, and it's back to where things used to be and we know they didn't work properly then. Not to mention the gaps: in effect no one has the leadership function so essential to the culture change talked about for 30 years but still a long, long way off and going in the wrong direction under this government; and no mention also of the what happens regarding the role the OAIC played in moving towards a government wide information policy. The AAT cannot provide inexpensive FOI review - the flagfall is $816, refundable but for $100 if the applicant meets with some success.

Not likely to have been an amount I would have risked for the information that was provided to me in this case. With the OAIC being wound up at the end of this year, I would encourage you to get any FOI requests lodged soon if you want the opportunity to have any rejections reviewed by the OAIC given the lengthy process it took for my results.

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BoE Tells RBA: Don't Release Gold Bar Details (FOI)

Two months ago I wrote a Freedom of Information (FOI) request to the Reserve Bank of Australia (RBA). Here is the crux of my email:

This is a request under the Freedom of Information Act.

I request that a copy of the following documents [or documents containing the following information] be provided to me: An inventory (bar) list forming the 80 tonnes official Gold reserves (stored with the Bank of England), including details which identify the individual bars by refiner, weight, finesse, serial number and any other identification recorded for audit purposes.

In order to help determine my status to assess fees, you should know that I am a representative of online media and this request is made as part of news gathering and not for a commercial use.

While Gold holdings do fall under the operations of the bank, the position held has remained unchanged and published for well over a decade and I see no risk in providing details of the bars which underpin this position.

The RBA does state they are exempt from the FOI Act in relation to banking and market operations:

The Reserve Bank is exempt from the FOI Act in relation to documents in respect of its banking operations (including individual open market operations and foreign exchange dealings) and in respect of exchange control matters.

I assumed that Gold reserves sit within this exempt area given that it is detailed in the 'Operations in Financial Markets (Reserves Management)' section of the annual reports. However, given that their Gold holdings are public knowledge, as is the RBA's activity in the Gold leasing market, I could think of no logical reason that providing the information would be damaging to the institution or their operations.

The two (primary) responses I received are below.

February 28th (in aid of extending their deadline):

This email is intended to provide you with an update in relation to the processing of your request under the Freedom of Information Act 1982 (the Act).  It is also a formal notice as required under s27 (see below).

In terms of s27, (consultation – business documents) of the Act, the Reserve Bank of Australia is required to consult with a ‘person, organisation or undertaking’ in the event that (they) might reasonably wish to make an exemption contention that the document is exempt from release in terms of s47 (business).  Consistent with the terms of the consultation process provided for in s27, we have determined in writing that consultation is required, and therefore an extension of processing time (by a further 30 days) to enable consultation to take place (s15(6)) is provided for by the Act.

April 1st (today, April Fools?!):

Further to earlier correspondence regarding your FOI request, I wish to advise you that we have received a response from the Bank of England regarding information about the Reserve Bank of Australia’s gold inventory (as held by the Bank of England).

The Bank of England has advised us that it regards the information about the gold holdings that has been exchanged with the RBA to have been exchanged in confidence.  This is consistent with the Reserve Bank of Australia’s own view about our interactions with the Bank of England in relation to the gold holdings (i.e. we also regard our exchanges with the Bank of England to have been made in confidence).

Accordingly, I have decided to deny access to the information sought in terms of section 33(b) of the Freedom of Information Act 1982 (the Act) ‘as information or matter communicated in confidence by or on behalf of a foreign government [or] an authority of a foreign government … to an authority of the Commonwealth’ (being the Reserve Bank of Australia). Further, I have decided to deny access to the information sought also in terms of section 33(a)(iii) of the Act, which pertains to documents affecting international relations of the Commonwealth. I have decided that disclosure of the information sought by you would, or could reasonably be expected to, cause damage to the international relations of the Commonwealth.

So basically the situation is as follows:

99.9% of Australia's Gold reserves, 80 tonnes, are stored with the Bank of England (BoE), news of which first came to light on this site in December 2012.

Petitions to repatriate Australian Gold have garnered public support, but not to a critical level needed for it to become a political issue (you can still sign it here).

Supposedly this Gold belongs to Australia (managed by the RBA), yet when a member of the public requests a list of the Gold bar details (of which revealing would pose no risk that I can think of), the RBA says that they are unable to. Why? Because the BoE (who are merely a custodian of the Gold) said that it needs to be kept a secret.

In the final email, along with the advice that they would withhold the information, I was provided a document which detailed some options should I choose to challenge the decision. Included (amongst various options) are requesting an internal review, review by Administrative Appeals Tribunal, Review by Federal Courts or complaining to the Ombudsman. If anyone has any experience with challenging an FOI decision or ideas on what grounds I could do so then I would welcome your thoughts in the comments below (in a timely fashion as I only have around a month for any challenge). Alternatively you are welcome to email me (address at top right of blog under social media buttons).

Any other opinions or comments on the outcome so far are welcome, as are any thoughts on risks or reasoning the Bank of England may have for keeping the Gold bar details a secret.

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