Banks polish golden potential

Banks en masse are shifting from mobilising capital in gold into launching gold keeping services to avoid enforcement of a state regulation forbidding them from raising deposits in gold from May 1, 2012.

In light of State Bank’s Circular 11/2011/TT-NHNN of April 29, 2011 banks are obliged to stop raising capital in form of gold from May 1, 2012. However, several banks continue inviting clients to deposit gold with six to 10-month terms at 3 to 4 per cent, per year interest rate.

Banks will change from gold raising into keeping gold for clients from May 1, 2012 whereas the interests of existing gold depositors will be assured.

In fact, at this point of time, scores of banks like VPBank, SHB, Techcombank, DongA Bank, ACB and Eximbank have rolled out the gold keeping service with 3 per cent per year interest rates.

 Ho Chi Minh City Banking University’s Business Administration head Le Tham Duong said banks rushed into holding gold for people to ‘dodge’ state regulations because raising capital via gold was much cheaper than raising dong currency. For banks with liquidity drought they can use gold as collateral on the interbank market to borrow.

Similarly, Vietnam Gold Business Joint Stock Company (VGB) general director Tran Thanh Hai said the move was pragmatic but “the State Bank needs to introduce clear regulations on gold holding and safe leasing services at banks.”

Economists, however, hold a different view assuming that paying interest rates for keeping clients’ gold was abnormal and counter to world practices since in many countries people have to pay fees for banks to keep gold. The central bank needs to impose a zero per cent interest rate on gold keeping at banks or even charge people to pay fees for banks holding their gold.

“Paying interest rates for gold is reasonable to attract people, but that interest rate must not exceed dong deposit rate,” said general director Truong Van Phuoc at Eximbank, one of top 10 banks in asset value in Vietnam.

“Interest rates from 2 to 3 per cent per year for banks holding gold for clients are appropriate,” said Phuoc.

Industry insiders viewed banks rushing into mobilising gold as a risky venture since under the plan on mobilising gold from the community, only capable banks were eligible to raise gold from people.