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Jiang Jianqing (C), chairman of Industrial and Commercial Bank of China, pushes a button with China's Ambassador in Italy, Li Ruiyu (R) and Stefano Scalera (L), Counsellor to Italy's Minister of Economy and Finance, during the unveiling of their new branch in Rome, October 19, 2015. Reuters/Alessandro Bianchi

ICBC Standard, the investment arm of China's largest bank, Industrial and Commercial Bank of China (ICBC) is reportedly purchasing a pricey gold and silver vault in London.

The buying of vault signals ICBC Standard's growing footprint in the London bullion market. However, China bank’s foray is happening at a time Western banks are moving away from commodities under the weight of heavy regulation and plunging profits, reports The Independent.

The price for the 1,500 ton vault is US$4 million (AU$5.69 million). Owned by Deutsche Bank, the vault is managed by security firm G4S and is located at Abbey Road in northwest London.

ICBC Standard Bank was formed in February 2015 after it bought a controlling stake in South Africa based Standard Bank's London-based global markets division.

Clearing membership

ICBC Standard is also trying to become a clearing member of London’s US$5 trillion (AU$7 trillion) gold and silver over-the-counter market. It has already applied for the membership. As and when it happens, it will take OCBC to the elite club of JP Morgan, HSBC, Bank of Nova Scotia, Barclays and UBS.

Deutsche Bank gave up its clearing membership in 2015 after shutting down its trade of physical precious metals.

As a big bank, CBC has more than four million business clients and claims to service 410 million retail customers. It paid US$765 million (AU$1.08 billion) in acquiring the London division of Standard Bank as part of the efforts to expand in the bullion and forex trade. Earlier in 2008, ICBC bought 20 percent stake in the 150-year old Standard Bank group.

China gold reserves

Meanwhile, China expanded its gold reserves in December 2015 and the total purchases in the second half of 2015 soared to 100 tonnes plus. China's gold reserves jumped to 56.66 million troy ounces at the end of December, against the 56.05 million ounces it had in November, the People's Bank of China (PBOC) said.

China is world's sixth largest official gold holder. The international prices of gold are at a nine-week high in January, reports Reuters.

“The PBOC is adding to its gold stock at a steady pace,” noted Shandong Gold Group chief analyst Shu Jiang and added that the central bank's purchases are driven by the urge to diversify forex reserves.

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