Vietnam's Banks to Convert 30 Tons of Gold to Cash

Source:

"Vietnam's banks suffer from soaring prices as they face state-mandated deadlines to liquefy gold reserves."

Vietnam Business News

The Circular No 22/TT-NHNN on gold mobilizing-lending activities of credit institutions required the deadline for banks to finalize the conversion gold into cash on June 30, 2011.

The banks, which converted gold in to the dong although enjoying high difference between the gold saving rate and dong deposit rate, have suffered losses due to soaring international gold prices.

However, there are still banks expecting the international gold price will decrease or the liquidity of the dong will become weak to convert gold into the banknote.

According to the statistics from the State Bank of Vietnam (SBV), till the end of September 2010, 23 credit institutions mobilized 92.6 tons of gold, equaling to 73 trillion dong. 60% of mobilized gold volume has been used for lending activities. Suppose this mobilized gold volume remained unchanged so far, and 30% of gold volume that was converted into dong already, banks will need to purchase about 27.78 tons of gold from the domestic market.

In fact, the total gold mobilization in Q410 and Q111 still increased strongly, so according to the conjecture, there will be about 30 tons of gold to be converted into cash.

SBVís deputy governor, Nguyen Dong Tien, at the press conference on April 29, 2011 said till March 31, 2011, the balance from conversion gold into cash decreased 14.7% from the end of last year.

The central bank has said that 75.85% of the gold mobilization of the banking system is concentrated in HCM City and 11.67% in Hanoi. Typically, rural people prefer to keep gold than urban people when viewed from the perspective of accumulation. But in the localities, gold is not being raised much, suggesting that gold is speculative rather than investment.

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