The Prudential Regulation Authority (PRA) has finalised guidance that eases how UK banks must capitalise allocated physical gold held in segregated accounts, a move industry participants say will lower the cost of offering custody services and could accelerate growth in retail and institutional demand for allocated metal.

What changed

The PRA's guidance, published on 17 July 2026, clarifies that segregated, audited allocated gold holdings — where specific bars or kilobars are identified and held in separate client accounts — meet the regulator's criteria for high‑quality liquid assets (HQLA) under UK liquidity rules. The change follows a consultation process launched in late 2025 that sought to reconcile prudential safeguards with market practices for physical bullion custody.

Under the updated framework, banks that custody allocated gold in independently audited, segregated accounts will be able to apply reduced liquidity haircuts and lower risk weightings when calculating regulatory liquidity coverage ratios (LCR) and, in some cases, capital requirements. The PRA emphasised safeguards against operational and custody risk, insisting on third‑party audits, conflict‑free ownership registers and transparent reconciliation processes.

Why it matters to gold investors

  • Lower custody costs: By reducing the capital banks must allocate against hosted allocated gold holdings, the guidance should enable banks and vault operators to offer custody at lower margins, industry participants said.
  • Broader access to allocated gold accounts: Retail and smaller institutional investors who were previously priced out of bespoke allocated solutions may gain access to bank‑sponsored allocated accounts with competitive fees.
  • Potential impact on gold premiums: Greater retail availability of allocated, segregated gold could narrow some local premiums and shift flows away from unallocated or paper exposures where counterparty and settlement risk differ.

Market reaction and industry response

Vault operators, bullion banks and private banks welcomed the guidance. A spokesperson for a major UK bullion bank said the clarification "removes a key regulatory obstacle that made allocated custody commercially unattractive for many institutions. We expect to roll out enhanced segregated allocated accounts in the coming months."

London vault operators also signalled capacity investments. One senior executive at a global vaulting firm said the firm would expand segregated storage capacity and accelerate investments in audit and reconciliation systems to meet the PRA's new audit and transparency standards.

Smaller independent vaults cautioned that compliance costs — specifically meeting the PRA's third‑party audit and reporting requirements — could be meaningful. "Smaller vault operators will need to upgrade controls and documentation to qualify under the new criteria," said an industry consultant. "That may lead to further consolidation in the secure‑storage sector."

Implications for the London market and international flows

London has long positioned itself as a pre‑eminent global custody hub for physical gold. The PRA's move could reinforce that role by making it easier for UK banks to host allocated inventories without disproportionately large capital charges. Market participants expect this to attract both domestic savers and international clients — particularly those seeking segregated, trustable custody with strong regulatory oversight.

Analysts caution the change is not a panacea. "This reduces one component of cost," said an independent precious‑metals analyst. "Other factors — such as vault fees, insurance costs and cross‑border transfer frictions — still determine the economics of allocated ownership versus ETFs or unallocated accounts."

Risks and regulatory safeguards

The PRA's guidance contains explicit safeguards designed to limit operational, custody and concentration risks. Requirements include:

  1. Independent third‑party audits of inventory and reconciliation processes at least quarterly;
  2. Client‑level segregation with unique serialised bar identification and tamper‑evident procedures;
  3. Clear contractual terms specifying ownership, delivery rights and procedures for insolvency or cross‑border requests;
  4. Robust incident‑reporting and business‑continuity plans tied to the vault operator and custodian bank.

Regulators stressed these protections aim to avoid recreating systemic exposures seen in unallocated market squeezes. The PRA also signalled ongoing supervisory reviews of banks' implementation and the potential for tightened standards if operational weaknesses emerge.

What investors should watch next

  • New product launches: Expect UK banks and wealth managers to announce segregated allocated accounts and possibly retail‑facing custodial products within 3–6 months.
  • Fee competition: As banks offer allocated custody with lower capital drag, watch for fee compression and promotional pricing, especially from global custodians seeking market share.
  • Operational audits: Investors should ask prospective custodians for copies of third‑party audit reports, reconciliation frequency and detailed delivery procedures.
  • Cross‑border considerations: International investors should confirm legal enforceability of segregation and delivery rights across jurisdictions before moving bars into UK custody.

For gold investors, the PRA's policy change is notable: it aligns prudential oversight with market practice and lowers a structural cost that historically discouraged bank‑sponsored allocated offerings. While not a guarantee of cheaper storage overnight, the guidance clears a regulatory hurdle and sets conditions for a meaningful expansion of allocated gold custody in the UK market.