Regulation (EU) 2024/1623 introduced, with effect from 1 January 2025, a new definition of “gold bullion” in Article 4(1)(60a) CRR, according to which:

“ ‘gold bullion’ means gold in the form of a commodity, including gold bars, ingots and coins, commonly accepted by the bullion market, where liquid markets for bullion exist, and the value of which is determined by the value of the gold content, defined by purity and mass, rather than by its interest to numismatists.”

This wording is in line with the interpretative guidance provided by EBA Q&A 2016_3011, which allowed “gold bullion coins” and other gold items to qualify for the preferential 0% risk weight so long as their value is driven exclusively by gold content and a liquid market exists.

More particularly, credit institutions that carry out a pawncredit business are able to grant loans to their clients secured by pledge of certain physical gold items supplied by the same clients. The pledged gold received by the pawncredit institution is predominantly in the form of jewelry items (rings, necklaces, bracelets, etc.). 

For every jewelry gold item the credit institution is mandatorily obliged to:

• test and document purity (fineness) and mass of the gold contained;

• consult live bullion‐market quotations to determine the value of the gold;

• apply a conservative haircut unrelated to any artistic, brand or numismatic element; and

• maintain records demonstrating that the value recognized to the collateral is driven solely by the price of the gold.

No premium must be attributed to craftsmanship, design, scarcity, brand, fashion or historical provenance for every jewelry item. 

Secondary sales of such jewelry items (in case of default of the client under the credit line granted) is made via open tender processes run by the credit institution in accordance with specific provisions of laws, where professional bullion dealers or refiners normally participate (although participation is allowed to the general public and to any person potentially interested). At such market venue the initial tender price of each jewelry item is based (as a "floor") on the updated market value of gold content of the item. Therefore, pursuant to this mechanism the pawncredit entity is able to recollect at least a value equal to the market value of the gold content of the jewelry at the time of the tender.

The tender processes are held on a regularly basis (as set forth by the applicable legislation) by each pawncredit entity and there are several historical data based on multiple years of market practice that confirm the high level of liquidity of those market venues where gold in the form of jewelry is normally exchanged, at prices which have been demonstrated to be totally coherent with the prices of the international markets (such as, without limitation, London bullion market).

In practice, although the form of the collateral received by the pawncredit institution is gold in the form of jewelry, the valuation methodology, the realization channels and market liquidity of this collateral mirror those of standard bullion bars and/or gold coins.

In addition to all the above, please also consider the following aspects:

1. statistically less than 5% of the pawn loans are recovered through the sale of the underline gold jewels; 

2. the regular tender mechanism used by the pawncredit intermediaries for the sale of the collateral in the form of gold jewels is the same of the auction mechanism normally used by stock exchanges or multilateral trading facilities for "small cap" equities or for non-government bonds, except that the tender organized by the pawncredit entities have resulted to be far more liquid since the jewels in gold are never unsold at a price lower than the spot price of the gold considering the purity and mass, also because the jewelry items are constantly purchased by the gold market operators that then can decide to melt the gold into ingots or to use the gold in other form.