The State Bank of Vietnam (SBV) is collecting feedback for a decree on gold trading, which will include a monopoly for the central bank on accepting gold deposits.

The State Bank of Vietnam.

The new decree will supersede Decree No.24/2012/ND-CP and get rid of certain conditions for companies that make gold jewellery.

Decree No.24 confers on the Government a monopoly on gold bullion production and import and export of the metal.

It classifies bullion trading as a conditional business requiring institutions and individuals to obtain a license from the central bank.

To get a licence they should have a capital of at least 100 billion VND (4.7 million USD), a distribution network covering at least three provinces or centrally-administered cities, at least two years experience in the gold trade and paid taxes on gold trading of over 500 million VND (23,800 USD) for at least two years when the business was not restricted.

Before Decree No.24 was issued, gold deposits and loans by banks had been stopped in November 2012 under the central bank’s Circular No.11/ 2011/TT-NHNN.

Before 2012, the gold market had been very volatile. Banks’ acceptance of gold deposits and lending had greatly impacted the liquidity of the banking system and even caused economic instability.

In the five years since, Decree No.24 has reduced the importance of gold in the economy and stabilised the gold market. Gold price movements no longer affect foreign exchange rates and, thus, economic stability. 

The precious metal is no longer the attractive asset class it used to be.

So, with the sailing in the gold market being smooth, why does the central bank feel the need to issue an amended Decree 24.

In August the Government Office wrote to SBV Governor Le Minh Hung informing him the SBV should “continue focusing on research and implementation of appropriate solutions to mobilise foreign currency and gold from the people to serve development and investment.”

At a recent meeting with the governor, the Prime Minister’s Working Group led by Government Office Chairman Mai Tien Dung again stressed the need to mobilise foreign exchange and gold.

Dung said Vietnam’s decision to ban gold deposits and reduce interest on dollar deposits to zero have helped restrict the pervasive influence of the dollar and gold on the economy and prevent chaos in the market, since people have stopped using them as a means of payment.

However, an estimated 500 tonnes of gold is held by the public, which, if brought into the market, would be good for the economy.

To enable this, the central bank found it necessary to amend some provisions in Decree 24.

Along with the task of continuing to manage the bullion market, the new decree also aims to simplify administrative procedures and scrap some of the conditions for issuing licences to gold businesses.

Businesses which make gold jewellery and fine arts will only need to meet the establishment conditions and register for production, with other rules pertaining to certificates of production and technical facilities set to be eliminated.

More than 5,800 businesses have obtained certificates of eligibility for gold jewellery and fine art production from the central bank based on Decree No.24.

For gold bullion trading too, the SBV is set to ease regulations to reduce unnecessary expenses for enterprises.

But the central bank will have a monopoly in mobilising gold deposits from organisations and individuals and trading gold on account.

Commenting on the SBV’s monopoly on mobilising gold deposits from the public, many experts agreed this is necessary to efficiently manage the gold market and foreign exchange rates.

The government hopes to extract the estimated 500 tonnes of gold with the public through the SBV.

In the past, people could deposit their gold at the SBV as well as commercial banks.

But the experts also warned about the potential risks since gold prices depend on the global market.

Great care and transparency are required on the part of the central bank, they said.-VNA