European lawmakers are studying a proposal to add gold to the core capital of banks. Meanwhile, in Turkey, this practice has already been operational for quite some time. Up until last year, banks were allowed to keep 10% of their Lira reserves in gold. In March of this year, the Turkish central bank raised this to 20%, and it is now up to 25%.
Banks have jumped into this sector eagerly, offering gold deposit accounts to the public in exchange for stashed jewelry. Turkey is one of the largest consumers of gold in the world, and Turks traditionally buy gold as collateral against the periods of inflation that frequent the Turkish economy. It is estimated that the Turks have 5000 tons of gold in their homes. In exchange for depositing this at banks, individuals may withdraw either cash or gold bars. The account also returns some interest. The intention of the Turkish government is to get this forgotten gold back into circulation so that less gold needs to be imported, and this in turn is useful to bring down the current account deficit. Experts expect that the measures will have a lasting effect on the sale of gold at the Grand Bazaar, a world famous market for the yellow metal.