China’s ICBC Standard Bank announced Monday it was buying a precious metals storage vault in London for an undisclosed sum from Barclays. The purchase, which would be completed in July, comes less than a week after the bank — the world’s biggest lender by assets — became a member of London’s precious metals clearing system in order to increase its influence in the city’s gold market that handles about $5 trillion in transactions every year.
“This enables us to better execute on our strategy to become one of the largest Chinese banks in the precious metals market,” Mark Buncombe, head of commodities at ICBC Standard Bank, said in a statement. “The acquisition of a precious metals vault allows us to expand our services in clearing and processing.”
Despite a slight drop in demand for gold in the first quarter of 2016, China still accounts for over a quarter of the global demand for the metal. The deal makes ICBC Standard — which was formed last year after the Industrial and Commercial Bank of China bought a controlling stake in Standard Bank’s global markets business — the first Chinese lender to own a vault in London, bringing it closer to the city's lucrative bullion market.
It also makes it much easier for the bank to service its Western clients by providing it a closer location to store precious metals.
"London being the place where a lot of the bullion is traded, especially from an institutional perspective, it makes sense for them," Mark O’Byrne, director of the Dublin-based broker GoldCore, told the Wall Street Journal. "Some people, particularly Western buyers, might be more inclined to have their gold stored in London than have their gold stored in China."
The vault, opened by Barclays in 2012, can reportedly hold up to 2,000 metric tons of gold and other precious metals, making it one of Europe’s largest. The sale is believed to be part of Barclays’ recent push to offload its non-core assets, including its precious metals business.
The location of the vault is secret, but Barclays has previously disclosed that it is located within the M25 motorway that circles London.