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State Bank moves to prohibit loans to finance gold buys
Banks and other credit institutions have been banned from making loans for the purposes of financing gold purchases, except in cases authorised by the State Bank of Viet Nam, under a new circular issued by the central bank on Saturday.
The circular, coded 33/2011/TT-NHNN, which takes effect today, is intended as another measure to stabilise the nation's overheated gold market.
Exceptions to the ban would include loans approved by the State Bank Governor for purchases of gold to make gold bars or jewellery, as well as to import gold pursuant to import licences.
Under the new circular, banks must assure collateral against such loans at a risk ratio of 250 per cent.
Credit agreements already signed and taking effect before today would be allowed to take effect contrary to the terms of the circular.
Last Thursday, the central bank also asked credit institutions to report on gold they held in mortgage against loans made to organisations and individuals between January 1 and October 7 of this year.
According to Decision No.7816/NHNN-CSTT issued last Thursday, the report must include information related to lending turnover, outstanding loans, the number of borrowers, and the purposes for the loans. It must also include information about efforts of authorised agencies to monitor mortgages of gold and the use of such loans.
The circular also requires credit institutions to carefully verify capital and collateral of organisations and individuals which give gold as security for bank loans, ensuring compliance with all current regulations, including State Bank Directive No 01/CT-NHNN issued back on March 1, which asked credit institutions to formulate and implement reasonable business plans for 2011 in line with credit growth and quality improvement targets set by the Government.
To archive those targets, commercial banks were required to reduce the number of non-productive loans in their portfolios to no more than 16 per cent by December 31.
The new regulation also requires credit institutions to bear full responsibility for loans to organisations and individuals to speculate in gold, as such activities contributes to disorder in the domestic gold and foreign exchange markets.
Provincial and municipal agencies responsible for inspecting and overseeing banks must closely monitor the mortgaging of gold at banks and make weekly reports of violations to the central bank.
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