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ICBC Standard Bank is purchasing the lease on Deutsche Bank's London bullion vault that can store commodities such as gold and silver, reports say. The move is in line with its efforts to increase its footprint in London's bullion market.
The vault, which has a capacity to hold 1,500 tonnes, became operational in June 2014. British security services company G4S that built the vault is managing it as well.
Regarding the lease value, Reuters quoted a source as saying, "The figure that was initially talked about may have been around $4m [€3.7m, £2.8m], but it's way lower now".
This move follows Industrial and Commercial Bank of China (ICBC) acquiring a 60% stake in Johannesburg-based Standard Bank's global markets business in January 2014, in a deal that would give the Chinese banking giant a significant trading platform in London.
ICBC had then said, "With full banking licenses, SB Plc has an active global markets business with in depth knowledge of emerging markets, as well as extensive experience in trading commodities and providing global markets solutions to meet its clients' needs".
The joint ICBC Standard Bank also intends to trade in the gold and silver over-the-counter business in London and has applied to become a clearing member of the same. A second source told Reuters, "[The clearing membership is] still subject to a vote, which has not taken place yet".
Five banks including JP Morgan, HSBC, Bank of Nova Scotia, Barclays and UBS, which are shareholders of the London Precious Metals Clearing (LPMCL) company, will decide whether to grant or decline this clearing membership, within the next few months.
Many western banks have reportedly been retreating from the commodities business to cut costs and reduce regulatory burden, creating a void in this sector, which the Chinese and South African lender is now aiming to fill.
Deutsche Bank, following the closure of its physical precious metals trading arm and withdrawal from gold and silver benchmark price setting, resigned as a clearing member of the LPMCL in 2015.