Seven banks yet to buy enough gold

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Among these, one bank has yet to close its gold account overseas as required and is asking for more time to do the job to avoid losses while the State Bank of Vietnam (SBV) said it would turn down the unnamed lender’s proposal.

Six other banks have still failed to complete gold mobilization to settle all arrears, meaning they don’t have enough gold to pay depositors and are unable to recover loans in gold. Some lenders with big outstanding balances are busy negotiating with customers to convert the gold loans into Vietnam dong.

Saigon Commercial Bank as one of the six will adopt its own solution to tackle the problem since the lender has been singled out by the central bank for restructuring.

SBV governor Nguyen Van Binh has urged banks to settle gold arrears before the end of this month.

At a six-month operation review meeting of the banking industry in HCMC on Wednesday, Binh said as local banks now are sitting on huge amounts of Vietnam dong while gold supply is always available at the central bank, the lenders should purchase enough gold to close positions in a timely manner.

When asked about the local gold market movement after June 30 if residents continue hunting for the yellow metal while little supply is left at commercial banks, Binh reassured that banks don’t need to worry as the central bank will sell gold to help deal with such a problem as it has done over the past time.

In response to those who wonder whether the local and global price gap can be narrowed down or not, an SBV official said it impossible to do so in the near future. A rapid price gap reduction will result in speculations and market volatility and if international prices turn volatile, it would be difficult to adjust local prices accordingly and a bigger price gap would be unavoidable, he explained.

“The price gap reduction will be done gradually by increasing supply for the market and other policies to increase dong value and mitigate gold holdings, and low demand will help minimize the gap between local and global gold prices then,” the official said.

SBV has constantly sold gold to the market via auctions with an aim of providing more supply for lenders to help them settle gold arrears.

The central bank on Tuesday sold 25,900 taels of gold via bidding, taking the total sale volume via auctions to around 813,200 taels, or 30.5 tons of gold. The monetary authority says it will continue gold auctions until local appetite cools down.