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Gold now at the “T-junction”   2012-05-21 - TBKTSG

The deadline for short term gold certificate issuance by credit institutions has been extended to November 25 instead of May 1 as previously scheduled. However, the latest decision by the State Bank still cannot clearly show how gold would be in the future, after the deadline November 25.

Which way for gold?

“Nothing new with the new decision,” commented the Head of the Business Division of a commercial bank about the new decision by the central bank to extend the deadline for gold certificate issuance.

The executive said that the extension of seven more months would only give more time to commercial banks and the Saigon Jewelry Company (SJC) to balance their working capital and push up the finalization of transactions.

“Like the previous policies set up by the State Bank, the decision will not be able to settle the “goldenization” – the problem experts say is as dangerous as the “dollarisation,” he said.

“The gold market would be still the same, and gold certificates would also be still the same,” he continued.

Meanwhile, commenting about the deadline extension, General Director of Asia Commercial Bank (ACB) Ly Xuan Hai said this is a reasonable move. Vietnam still does not have a new legal framework on mobilizing gold from the public. Therefore, the timely decision would help avoid the gold mobilization interruption.

He explained that if banks had had to stop mobilizing gold as of May 1 through gold certificate issuance, banks would have lost the opportunity to find a big volume of capital in gold among the public.

The Q1 finance report of ACB showed that by March 31, 2012, the total capital mobilized by the bank had reached 49 trillion dong, an increase of 6 trillion dong over late last year.

The capital mobilized in gold by that time had accounted by 1/3 of the total capital mobilized by the bank (145,290 billion dong), which can show the big role of gold among the bank’s capital sources.

Hai said that Vietnam should set up different ways of mobilizing capital in gold which would replace the service of “keeping gold for clients” (clients can leave their gold at banks which would “take care” for the clients’ gold and pay money to clients. This is a “trick” played by commercial banks to dodge the laws, which is understood as a way of receiving gold deposits from people).

Hai said that the amount of gold kept by the public is really huge, which is a huge capital source that commercial banks should not ignore.

For example, people, who have gold, can mandate banks to make investment with their gold, and banks would pay profits to the people within a certain time.

One year ago, on April 29, 2012, the State Bank of Vietnam released Circular No. 11, stipulating that banks have to stop signing new contracts on lending gold to clients since May 1, 2011, and that banks can only mobilize gold to pay to people.

The watchdog agency then gave commercial banks one year to wrap up the signed contracts and take actions to minimize the bad influences to the capital structure and credit activities of the whole banking system. It stipulated that the gold mobilization and lending activities must be stopped as of May 1, 2012.

However, it seemed that banks did not do anything to prepare for the decision. Especially, they even pushed the gold deposit interest rates up in an effort to seek more gold capital. A lot of banks have recently launched the service of keeping gold for people, with which they still can receive gold deposits from people.

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