Fractional Reserve Bullion Banking – Part 3

In our last post we discussed the risks a bullion bank faces when operating a fractional reserve system due to the mismatch between when its assets and liabilities fall due. The main way this risk is mitigated is by borrowing gold from another bullion bank or central bank. To understand how this works in practise, we need to understand how the bullion banks interact with each other. [read more]