by Thien Ly
The Government issued Decree No 24/2012/ND-CP last week, stipulating that the Government would assert a monopoly over gold bullion production as well as import and export of gold.
The new decree was expected to stabilise the gold market, limit hoarding and speculation, and minimise the influence of the gold market on monetary policy.
The regulation would classify bullion trading as a conditional business requiring institutions and individuals wanting to buy or sell gold to obtain licences from the State Bank of Viet Nam. They would be required to maintain capital of at least VND100 billion (US$4.7 million), maintain a distribution network covering at least three provinces or centrally-administered cities, and have at least two years experience in the gold trade, and have paid taxes on gold trading of over VND500 million ($23,800) for at least two years.
The effect of the strict rules will be to close down a substantial majority of gold dealers around the country.
According to the Viet Nam Gold Traders Association, the country had about 10,000 gold shops by the end of last year, mainly in major cities like HCM City, Ha Noi, Can Tho and Da Nang. Most were small businesses.
The decree was expected to reduce that number to just 10 authorised dealers nationwide.
"The new regulations will stop our business, and we will have to find another job to make a living," said Nguyen Thi Ty, owner of a gold shop in District 11 in HCM City.
HCM City Association of Fine Arts, Gold, Jewellery and Gemstones chairman Nguyen Van Dung said over 2,000 gold shops in the city would have to shift to another kind of business or limit themselves to only selling gold jewellery. However, Dung also noted the possibility that some shops would continue trading in gold illegally.
Nguyen Quang Huy, head of the central bank's foreign exchange management department, said public demand for gold would be met not only by authorised enterprises but also credit institutions.
He said the State Bank was also likely to give existing shops a grace period of about seven months during which they could continue to sell gold.
The rumour has finally been confirmed that Sai Gon-Ha Noi Commercial Bank (SHB) is preparing to acquire Habubank, in the latest example of the mergers and acquisitions trend in the banking sector this year.
The State Bank of Viet Nam said last week that it had approved in principle the merger between the two banks, which would be conducted in accordance with Circular No 04/2010/TT-NHNN of February 11, 2010.
According to an undisclosed source quoted by the online newspaper VnEconomy, SHB and Habubank signed a memorandum of understanding regarding the merger on March 7.
The deal was deemed to be consistent with the State Bank of Viet Nam's target of seeing five to eight banks merged in 2012. The target was part of the overall process of restructuring credit institutions, a goal aimed at helping strengthen the financial capacity and improve the transparency of the banking system.
The process was also expected to play a role in increasing public trust in the domestic currency and strengthen the monetary forecasting capacity of financial institutions.
Late last year, Sai Gon Commercial, First Commercial Bank and Tin Nghia Commercial Bank merged under the sponsorship of the Bank for Investment and Development of Viet Nam. After the merger, the charter capital of the new bank totalled nearly VND10.6 trillion ($504.7 million). The newly reconstituted Sai Gon Commercial Bank began operations of January 1.
Mergers have been seen as the best option for weak banks that the central bank does not want to bail out. But both weak and healthy banks have been seeking opportunities to co-operate or work with international financial organisations.
Independent banking experts predicted that the local market would likely soon see a merger between major commercial banks, or involving a commercial bank with a majority of shares held by the Government, with Eximbank and Sacombank viewed as likely participants.
After purchasing over 103 million shares in Sacombank from ANZ Bank, representing a 9.6-per-cent stake in Sacombank, Eximbank holds 9.73 per cent of Sacombank's equity and has become the bank's leading shareholder.
Last year, a number of banks sold between 5 and 20 per cent of their shares to foreign partners, including SouthernBank, Viet Nam International Bank (VIB) and Orient Commercial Bank (OCB).
Deposit interest cap
Lifting the deposit interest rate cap could help lower lending interest rates and rescue enterprises from bankruptcy.
According to the Viet Nam Chamber of Commerce and Industry (VCCI), over 70,000 enterprises were dissolved last year, and the figure increased by another 6 per cent in the first quarter of the year.
The situation was attributed to enterprises' inability to borrow at high lending interest rates.
The deposit interest cap was introduced to prevent unhealthy competition between lenders in attracting depsosits. The race to offer higher rates was seen as a threat to the safety of the banking system, but authorities said they would reconsider the cap once lending interest rates were stable.
Liquidity has since improved significantly at many banks, and inflation has dropped in recent months to just about 2.5 per cent in the first quarter. But lending has remained stagnant.
According to central bank statistics, total credit pumped into the economy fell in the first three months of the year, and by March 20, credit balances were down by 2.13 per cent compared with the figure in late 2011.
The deposit rate cap was also seen as ineffective, with many banks offering rates above the 13-per-cent cap.
Experts said that eliminating the cap entirely would allow both lending and deposit interest rates to be set based on market principles and give companies better access to loans. Banks that played by the rules would remain healthy, while those offering inflated deposit interest rates would soon be eliminated. — VNS