The State Bank of Vietnam. (Photo: VNA) Hanoi (VNS/VNA) - The State Bank of Vietnam (SBV) is collecting feedback for a decreeon gold trading, which will include a monopoly for the central bank onaccepting gold deposits.
The new decree willsupersede Decree No.24/2012/ND-CP and get rid of certain conditions forcompanies that make gold jewellery.
Decree No.24 confers on theGovernment a monopoly on gold bullion production and import and export of themetal.
It classifies bulliontrading as a conditional business requiring institutions and individuals toobtain a license from the central bank.
To get a licence theyshould have a capital of at least 100 billion VND (4.7 million USD), adistribution network covering at least three provinces orcentrally-administered cities, at least two years experience in the gold tradeand paid taxes on gold trading of over 500 million VND (23,800 USD) for atleast two years when the business was not restricted.
Before Decree No.24 wasissued, gold deposits and loans by banks had been stopped in November 2012 underthe central bank’s Circular No.11/ 2011/TT-NHNN.
Before 2012, the gold market had been very volatile. Banks’ acceptance of golddeposits and lending had greatly impacted the liquidity of the banking systemand even caused economic instability.
In the five years since,Decree No.24 has reduced the importance of gold in the economy and stabilisedthe gold market. Gold price movements no longer affect foreign exchange ratesand, thus, economic stability.
The precious metal is nolonger the attractive asset class it used to be.
So, with the sailing in thegold market being smooth, why does the central bank feel the need to issue anamended Decree 24.
In August the GovernmentOffice wrote to SBV Governor Le Minh Hung informing him the SBV should“continue focusing on research and implementation of appropriate solutions tomobilise foreign currency and gold from the people to serve development andinvestment.”
At a recent meeting withthe governor, the Prime Minister’s Working Group led by Government Office ChairmanMai Tien Dung again stressed the need to mobilise foreign exchange and gold.
Dung said Vietnam’sdecision to ban gold deposits and reduce interest on dollar deposits to zerohave helped restrict the pervasive influence of the dollar and gold on theeconomy and prevent chaos in the market, since people have stopped using themas a means of payment.
However, an estimated 500tonnes of gold is held by the public, which, if brought into the market, wouldbe good for the economy.
To enable this, the centralbank found it necessary to amend some provisions in Decree 24.
Along with the task ofcontinuing to manage the bullion market, the new decree also aims to simplifyadministrative procedures and scrap some of the conditions for issuing licencesto gold businesses.
Businesses which make goldjewellery and fine arts will only need to meet the establishment conditions andregister for production, with other rules pertaining to certificates ofproduction and technical facilities set to be eliminated.
More than 5,800 businesseshave obtained certificates of eligibility for gold jewellery and fine artproduction from the central bank based on Decree No.24.
For gold bullion tradingtoo, the SBV is set to ease regulations to reduce unnecessary expenses forenterprises.
But the central bank willhave a monopoly in mobilising gold deposits from organisations and individualsand trading gold on account.
Commenting on the SBV’smonopoly on mobilising gold deposits from the public, many experts agreed thisis necessary to efficiently manage the gold market and foreign exchange rates.
The government hopes toextract the estimated 500 tonnes of gold with the public through the SBV.
In the past, people coulddeposit their gold at the SBV as well as commercial banks.
But the experts also warnedabout the potential risks since gold prices depend on the global market.
Great care and transparencyare required on the part of the central bank, they said.-VNA
VNA
