>> New ban on gold deposits and lending
>> Central bank may be granted sole authority to cast gold
>> Gold trading floors still operate despite ban
The State Bank of Vietnam’s circular on banning gold deposits and lending will cause difficulties for banks to deal with gold already in stock.
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| New ban likely to increase banks’ gold inventory |
Under the circular taking effect from May 1, all banks will be prohibited from receiving gold deposits, and from providing any investment or lending services in gold.
The rules are aimed to restrict speculation, stabilise the foreign exchange market and to increase the strength of the VND.
However, one of the side effects may prevent banks from finding outlets for gold they already have in store, leading to large gold holdings.
A representative from Asia Commercial Bank (ACB), said that gold, along with lending in foreign currencies account for up to 25% of the bank’s total loans, so the ban could very well restrict their operations.
In the first quarter of this year, ACB made a net profit of USD860 billion (USD41.54 million). Of the figure, gold transactions made up 20% to 25%.
Dang Van Thanh, Chairman of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), said the circular will also impact his bank’s profits. He, however, added that Sacombank will shift focus onto the jewelry business.
Jewelry traders are also worried about the ban on gold lending. Nguyen Thi Cuc, Deputy General Director of Phu Nhuan Jewelry Joint Stock Company (PNJ), said her company depends on gold loans from banks to produce their jewelry. She says that the new ban will cause difficulties for her firm.
According to the State Bank of Vietnam, gold deposited at commercial banks in Hanoi represent 11% of the total amount of gold in the country, while banks in Ho Chi Minh City hold 76%. The state bank has said that most of this is used for investment and speculation.
