The annual report of the UK Exchange Equalisation Account for the year to March 31, 2025, was published late last week --
-- more than eight months since the end of the year it covers, and much later than its typical publication date in July.
The Exchange Equalisation Account is where the UK's gold is held and managed by the Bank of England, which has custody of the gold.
GATA reported in October about the delayed publication of the audit --
https://www.gata.org/node/24155
-- and linked the delay to concerns over the gold held by the EEA.
Well-publicized problems with gold deliveries from the Bank of England shortly after Donald Trump returned to the U.S. presidency were followed by reports that the bank was using an unusual mechanism ("exchange for risk") to acquire gold on the New York Commodities Exchange in the second, third, and fourth quarters of 2025.
The EEA's annual report makes no reference to its delayed publication and says nothing to address the concerns raised by GATA about whether the report's delay was linked to problems over the EEA's gold. It is notable that there have been no "exchange for risk" transactions reported by the Comex in December, so the possibility remains that the EEA's annual report was published only after the Bank of England was able to reacquire sufficient gold.
The EEA annual report includes a section on Pages 33 to 35 explaining that the auditor has concerns about the accounting treatment of certain Special Drawing Rights-denominated assets held by the EEA and whether Parliament needed to be consulted to confirm certain decisions over loans made to two trusts sponsored by the International Monetary Fund. These trusts were created to provide financing to low-income countries that may be unable to arrange financing on their own. The auditor expresses concerns about the below-market rate of interest receivable on these loans.
Are the EEA's SDR assets and loans complicated enough to justify taking more than eight months to finalize the agency's annual report?
The time from July, when the annual reports are typically published, to this month, when the 2024-25 report was published, seems strangely long for the Treasury to need to reach an agreement on the wording used by the auditor and consequently enable him to raise the topic publicly with Parliament via the annual report.
Has the EEA told the full story here?
As a first possible alternative, it seems plausible that the auditor’s concerns over the loans made to the IMF-sponsored trusts run much deeper than simple compliance with obscure government accounting rules. Whether the loans made to the trusts are fully recoverable and possibly should be written down seems to be a more important issue. The underlying debtors of the IMF trusts are apparently themselves in poor financial condition.
In the published balance sheet of the EEA as of March 31, 2025, a revised presentation of the SDR-denominated assets has been made, and the loans made to the IMF-sponsored trusts have been reported separately on the face of the balance sheet. This was not done in the previously published balance sheet as of March 31, 2024, nor in previous years. This change gives support to the view that the auditor was more concerned about the recoverability of these loans rather than just their accounting.
If this is the case, then the IMF might be concerned about any suggestion that the sums involved were potentially not recoverable and might be urging the UK Treasury to avoid a write-down. This might take time to resolve with the auditor. The value of these loans is reported as L3.66 billion in the EEA Annual Report, certainly enough to get attention.
As a second possible alternative, if the delays in getting gold out of the Bank of England's vaults early this year and the reports of the bank's attempt to acquire gold via the Comex using the "exchange for risk" mechanism were not simply coincidental, then the auditor's comments are probably designed to obfuscate the EEA's true position.
In this alternative, we can surmise that the Treasury and Bank of England needed time to get enough gold into the EEA and that they also had to use this time to find something obscure and not really damaging to use to justify the annual report's delay. The topic of accounting for IMF-related SDR-denominated assets and liabilities was probably regularly debated with the auditor, so it could be a plausible subject to use as cover.
The Bank of England and Treasury would have enormous incentives to conceal that UK gold reserves had been leased out and could not be returned promptly. (Consider the reputational damage if the bank had lost the gold, even temporarily.)
As long as there was eventually a good enough title to enough gold, the auditor should be content with how this was reported, as long as the cover story for the delay was plausible.
That the EEA gold had left the bank's vaults and extra time was needed to replace it is not the only possible explanation for the annual report's delay, but it is a plausible one.
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