Gold trading ban sparks debate

The State Bank of Viet Nam’s probable decision to stop gold borrowing and lending activities at local commercial banks has sparked heated debate among banking insiders.

Most experts believe that under the new policy local financial institutions could lose a huge capital source that would serve economic development.

Huynh Trung Khanh, Chief of the representative office of the World Gold Council, said the public held an estimated 500 tonnes of gold, equivalent to US$ 17 billion.

If the central bank no longer mobilised or used gold this huge capital volume would be frozen, Khanh said.

The country has more than 10 banks involved in gold borrowing and lending activities.

Although gold mobilised by local banks accounts for only 30 per cent of the total volume privately held by the public, it is still a significant capital source for the economy.

Truong Van Phuoc, General Director of the Export and Import Commercial Joint Stock Bank (Eximbank), said his bank had mobilised about 10 tonnes of gold to date.

Eximbank’s Chairman of Management Board Nguyen Thanh Long said the central bank should not ban local banks from mobilising gold. Local banks could balance their capital sources themselves.

He said that commercial banks had slashed gold deposit interest rates to a very low level because the number of customers wishing to borrow gold declined.

The Government’s recent closing of local gold exchanges proved to be an effective measure to ease gold speculation on the market, so a ban on the mobilisation of gold was not necessary, he said.

Long suggested that the central bank either regulate the market as necessary or actively purchase the public’s privately held gold so that it could be deposited in the national reserve.

A representative of a major bank in HCM City also said the central bank had the management ability to ensure the safety of local commercial banks, so it was unnecessary to ban gold borrowing and lending activities.

Because of normal market supply and demand, the Government should instead have effective measures to manage the gold market rather than suddenly stop all gold borrowing and lending activities.

Cao Sy Kiem, a member of the National Council for Monetary Policy, supported the central bank’s plan to stop the banks’ gold mobilisation and lending.

He said that in other countries it was customary for banks to mobilise gold because they have tools that can help them closely manage practices and minimise risks.

VIETNAMNEWS

Tags: vietnam gold, Vietnam gold market, Vietnam gold trading