The Bangko Sentral ng Pilipinas has recently received inquiries about the airway bills issued by an airline for the gold bars shipped by the Bangko Sentral. The shipping of gold bars out of the country has been part of the gold operations of the BSP since its establishment in 1993. In fact, numerous countries also ship their gold reserves to a bank account located outside their respective country, for example, an account with the Bank of England or Federal Reserve Bank of New York, so that the gold can be used for international financial transactions.
As of 31 October 2000, the Bangko Sentral has gold reserves valued at approximately USD1.86 billion. Of these, about 95% had been shipped out of the country via a location swap transaction with an accredited international financial institution. Under a location swap transaction, the Bank’s counterparty delivers an equivalent amount of gold to the BSP’s account at the Bank of England after they take delivery of gold from the BSP’s vault and ship the gold out of the country. The counterparty can ship the gold taken from the BSP to another destination other than London where they have their refinery, vault or buyer, and use gold that is already in London to deliver to the BSP’s account at the Bank of England. This way, the counterparty and Bangko Sentral both save on the cost of shipping.
The Bangko Sentral ships its gold reserves to its account at the Bank of England so that the gold reserves may be used for investment in the international market. For example, the BSP’s gold reserves can be deposited with accredited foreign financial institutions, in the name of the Bangko Sentral, to generate interest income. The shipments are always approved by the Monetary Board and properly documented.