Vietnam may restrict gold business at commercial banks 
Last updated: 10/24/2010 17:00 
Gold deposits in banks have reached 90 tons, valued at nearly US$4 billion
The State Bank of Vietnam will issue new regulations this week that could restrict gold lending and borrowing at commercial banks, news website VnExpress reported on Sunday.

The report cited a central bank source as saying that a circular concerning gold trading has been completed and will be issued in the next few days at the earliest.

It said although details have not been disclosed, the central bank was considering restricting lending of gold and banning banks from using gold deposits to fund dong-denominated loans.

Local banks are now allowed to include up to 30 percent of their gold deposits for making loans.

The regulation has allowed them to earn huge profits as they can attract gold deposits at low interest rates of around 1 percent and offer loans at not less than 12 percent, VnExpress said.

Gold deposits in Vietnamese banks have reached 90 tons, equivalent to nearly US$4 billion.

If banks cut back on lending and attracting gold, a portion of the deposits will find their way to the market, bringing local prices down.

The price of gold in Vietnam hit a record high of VND33.36 million per tael on October 19. A tael is around 1.2 ounces of gold.

The large gap between local and world prices, at VND300,000-400,000 per tael, has driven gold smuggling into the country, in turn boosting dollar demand and making the dollar stronger.
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