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Gold trading floor is playing field of banks only?
The most important provision of the draft regulations on the operation of gold trading floors which is being compiled by the State Bank of Vietnam is that gold trading floors must be organised by commercial banks and organisers will have to meet a lot of requirements to be licenced.
What is the role of banks?
A finance expert said that according to international practice, gold trading floors should be managed by legal entities which are absolutely independent from banks in order to avoid risks. This is like the differentiation between a retail bank and investment bank. The jobs of banks on gold trading floors is just accepting money and gold deposits and loaning to gold investors.
However, Vietnam has its own characteristics. Many of the current 15 operational gold trading floors have been set up by commercial banks. This proves to not come in line with international practice in risks management.
However, experts believe that when promulgating legal documents, the State Bank of Vietnam should consider the specific characteristics of Vietnam to minimise losses for gold trading floors. They say that in the immediate time, the central bank should let commercial banks continue maintaining their gold trading floors.
Gold trading floor must not be playing field of banks only
However, experts said that the provision that the gold trading floor is the playing field of commercial banks only proves to be unreasonable.
Nguyen Cong Danh, General Director of Asia Gold Company, said that it would be unreasonable to allow banks only to run gold trading floors. Commercial banks themselves only have the function of providing payment services, while do not have the professional knowledge to organise gold trading floors.
Danh has warned that with such a regulation, many companies will ‘dodge the law’ by cooperating with banks to set up gold floors.
He believes that it is just necessary to set up requirements on capital, labour force and technology. Those institutions which can meet the requirements will be able to set up gold floors.
Currently, no commercial bank has stood alone to open a gold trading floor. On VGB gold floor, Techcombank, the founding shareholder of Vietnam Gold Trade and Investment Company, the actual owner of the floor, just provides payment and credit services.
A senior gold expert said that government agencies need to respect the reality now that commercial banks are cooperating with institutions to set up and run gold floors. The model of cooperation can help the involved parties share risks in doing business. Meanwhile, the cooperation can also help reassure investors.
The expert said that government agencies should focus on setting principles, like conditions for gold floor establishment, minimum deposit ratio, regulations on order matching process and standards for contracts to protect investors’ benefits. Meanwhile, they should ‘leave room’ for floor runners to set up their own regulations, such as loan interest rates and times for transactions.
Most people do not support the idea of establishing a concentrated gold floor.
The compilation of the document began in October 2008. However, no legal document stipulating the operation of gold trading floors has been promulgated so far.
VietNamNet, DTCK
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