Gold market begins to lose its glitter

Banks have been ordered to immediately stop lending money for gold trading and to rein in disbursed loans.

Each branch of the State Bank of Vietnam is responsible for investigating and punishing violators.

Suspending loans for gold trading comes in line with State Bank regulations and the Prime Minister’s direction that the Government controls gold business,” the State Bank said in a document sent to banks.

An official from SeABank questioned how banks could calculate loans for trading gold if customers did not advise that they were for trading gold.

Officials from Sacombank and Asia Commercial Bank, whose in-house gold trading floors are the most active, were not available for comment on Jan. 13.

Some market watchers estimate that total outstanding loans for gold trading has now reached about 2 trillion VND (108.11 million USD). On ACB’s gold trading floor, total value traded at peak periods reached 8 trillion VND (432.43 million USD) a day.

Most floors lend customers up to 93 percent of needed capital based on their net assets.

After the Government’s decision to stop banks lending for gold, trading in gold showed dramatically.

Earlier this week, the central bank also ordered 10 banks to report on the mobilisation and usage of capital in gold – and dong guaranteed by gold. The banks were asked to report on the effects of the shut-down.

On Jan. 6, the central bank banned trading gold via foreign accounts, effective immediately, with the exception of any further trades needed to pay off contracts and close accounts.

All foreign gold accounts must be terminated by March 30. The central bank also suspended pre-existing gold trade regulations.

Tags: Vietnam gold market