Banks seek way for selling gold

Currently, gold is becoming burden for banks because they are finding it hard to sell stockpiled gold

State Bank of Vietnam (SBV) is considering the possibility of not allowing banks to mobilise and lend gold for fear of risk.
However, at the moment, the central bank has not given a final decision yet. But the banking business people forecast that stopping of mobilising and lending gold is possible because lending gold would cause risks and pressures on exchange rates.

Presently, Vietnam has about dozens of banks mobilising and lending gold. Although the amount of gold poured into the banks is not much with the most well-peak period of only about 30 percent of stockpiled gold in the population, it also accounted for a very significant capital amount.

After the government’s decision of closing gold trading floor and stopping gold transactions on overseas accounts, gold transactions in the market has decreased considerably meanwhile the amount of stockpiled gold in banks is still big.

However, with the government’s decision, banks can only sell gold in domestic market. Therefore, the liquidity will be narrowed, risk will be higher and banks will have to limit gold mobilisation.

Since early this year, banks have made many changes on gold deposit and lending rate benchmark; even some have adjusted the gold deposit rate to nearly 0 percent.

According to the Vietnam Export Import Commercial Joint Stock Bank (Eximbank), the gold lending rate has fallen over half to only about 3 percent against the middle of last year. However, the total amount of mobilised gold is still increasing despite of the gold deposit rate decreasing to nearly 0 percent.

Similarly, Asia Commercial Joint Stock Bank (ACB) is also amongst banks lowering the gold deposit rate to nearly 0 percent. Particularly, ACB’s gold deposit rate for 2-12 month terms is ranging between 0.2 percent and 0.4 percent pa, 13 months at 1.3 percent pa with the deposit of minimum 2,000 taels of gold.

From April 14, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank)’s gold deposit rate was at only 0.07 percent pa and it was 0.05 percent pa for terms of 1-36 months at Dai A Commercial Joint Stock Bank (DaiABank).

Since April 12, Agribank Jewellery Co (AJC) decided to stop mandated gold transactions throughout its network.

Meanwhile, commercial banks still continued to raise gold but they were worried when AJC stopped gold mobilisation. They themselves are also seeking ways to sell stockpiled gold. In addition, demand of borrowing gold has not been improved much.

As estimated, Viet A Commercial Joint Stock Bank (VietABank)’s converted gold value in dong accounts for nearly 30 percent of the bank’s total assets and then ACB and Eximbank with over 10 percent of total assets. This figure is worrying leader of banks on liquidity problem.

One of reasons causing difficulties in selling gold is that gold is not being used as a common payment tool, even in real estate transactions. Currently, both consumers and investors choose dong or US dollar instead of gold for their payment activities.

Vietnam+

Tags: vietnam bank, Vietnam finance, Vietnam financial, vietnam gold, Vietnam gold market