another gold video, page-12

Hi there Tazmac

A private investor in gold may have alternative sources of income, so they can carry gold and not necessarily be affected by the lack of cash flow.

For banks cash flow is critical. They have to generate income to pay depositors interest and pay their shareholders dividends. So gold isn't good for them as a long term investment.

(You will sometimes find gold in bank Trading Books. They turn it over quickly so the negative cash flow isn't a problem, and the market risk capital is not as onerous as the capital charge in the Banking Book.)

Bonds and mortgages pay coupons which helps fund depositor interest. But you will find banks will carry most of their inventory in the Trading Book where it is turned over frequently. The yields on these securities aren't very high and the margin between the bond interest and the depositor interest rarely generates enough profit to justify using the capital.

You are right. As capital is scarce and expensive since the GFC, banks have lost their taste for carrying bonds and mortgage backed securities. But the driver for those decisions tends to be poor ROE (return on equity) rather than concerns about credit.

Cheers