Commercial banks participating in the production and trading of gold bars is necessary.

This is one of many comments contributed to the draft Decree amending and supplementing Decree 24/2012/ND-CP regulating the management of gold production and trading activities that the State Bank of Vietnam (SBV) is widely consulting on.

According to the Gold Business Association and Doji Company, if Decree 24 is supplemented with the regulation that credit institutions are considered by the State Bank to be granted a license to produce gold bars, meaning that credit institutions are allowed to carry out "production" activities, it will be inconsistent and inconsistent with the provisions of the Law on Credit Institutions.

However, the explanation of the State Bank of Vietnam on the above proposal stated that point d, clause 1, Article 114 of the Law on Credit Institutions 2024 stipulates that commercial banks are allowed to trade in gold according to the regulations of the Governor of the State Bank of Vietnam.

“The licensing of enterprises and commercial banks to participate in the production and trading of gold bars is necessary in the current period to ensure a more competitive, open and transparent gold market, and has been specifically explained by the State Bank in reports and submissions sent for public comments.

Accordingly, closely following the direction of the General Secretary on eliminating the state monopoly mechanism on the production of gold bars in a controlled manner on the principle that the State still manages the production of gold bars in Notice No. 211-TB/VPTW, the draft Decree stipulates the conditions for granting licenses to produce gold bars with the goal of selecting enterprises and commercial banks with sufficient financial capacity, complying with the law on gold trading activities to carry out the production of gold bars", the State Bank stated its opinion.

According to the summary report and explanation of the State Bank on the opinions of enterprises, commercial banks, and associations on the draft, a number of enterprises and banks recommended that the State Bank study and supplement regulations and guidelines for the implementation of online gold bar sales combined with direct gold receipt at licensed transaction points, and at the same time, there should be regulations on online gold sales.

The State Bank of Vietnam said that e-commerce activities related to gold are within the scope of regulation of Decree No. 52/2013/ND-CP on e-commerce (amended and supplemented by Decree No. 85/2021/ND-CP). Decree No. 24/2012/ND-CP does not have regulations on e-commerce activities related to gold.

In addition, Clause 1a, Article 20 of Circular 16/2012/TT-NHNN stipulates that enterprises and credit institutions only need to notify the State Bank of changes (termination or addition) to business locations for buying and selling gold bars.

VCB Gold (21).jpg
The State Bank of Vietnam disagrees with the proposal of the Vietnam Gold Trading Association and Doji that commercial banks should not be allowed to produce and trade gold bars. Photo: Nam Khanh.

Will allow gold trading on account when establishing exchange

Banks, businesses, and the Gold Business Association recommend that the State Bank research and develop a legal corridor and roadmap to allow the implementation of additional products to support market liquidity such as: gold futures, gold certificates, gold savings/loans, national gold trading floors, etc.

Propose that the State Bank consider adding provisions allowing enterprises and credit institutions that produce gold bars; export and import gold bars and raw gold to implement tools to prevent price fluctuation risks (futures, forwards, swaps) with gold accounts or the international market.

Propose that the State Bank study and supplement regulations allowing enterprises and credit institutions with licenses to import gold bars and raw gold to buy gold futures from abroad.

Propose to supplement the mechanism allowing credit institutions with a License to export and import gold bars, raw gold, and a License to produce gold bars to authorize the credit institution's subsidiary to carry out activities in the credit institution's License.

Explaining the above opinions, the State Bank said that Clause 2, Article 112 of the Law on Credit Institutions stipulates, "The Governor of the State Bank shall prescribe the scope of foreign exchange, provision of foreign exchange services, provision of derivative products; conditions, documents and procedures for approving foreign exchange trading, provision of foreign exchange services, trading and provision of derivative products by commercial banks".

After the Decree amending and supplementing Decree 24 is issued, the State Bank will review and amend relevant regulations to create a basis for commercial banks to be able to provide gold derivative products.

Enterprises using derivative instruments must account for them according to the regulations of the Ministry of Finance in Circular 210/2009/BTC guiding the application of International Accounting Standards on financial statement presentation and disclosure of information for financial instruments in Vietnam.

The State Bank will coordinate with relevant agencies to consider adding gold to the List of goods allowed to be traded at the Commodity Exchange as prescribed in Decree 158/2006/ND-CP dated December 28, 2006 of the Government detailing the Commercial Law on the purchase and sale of goods through the Commodity Exchange (as amended and supplemented).

Gold trading activities on accounts will be studied and guided along with the establishment of a centralized gold exchange. In the draft Decree, the State Bank proposed not to amend this provision.

In response to the banks' proposal to add a mechanism allowing credit institutions with a license to export and import gold bars, raw gold, and a license to produce gold bars to authorize their subsidiaries to carry out activities in the license of the credit institution, the State Bank of Vietnam said that the draft Decree stipulates that the State Bank of Vietnam only issues licenses to commercial banks, and does not stipulate a mechanism for authorizing and entrusting the performance of activities to subsidiaries of commercial banks.

Agribank and BIDV proposed to study and supplement regulations that credit institutions can issue Gold Ownership Certificates to customers without having to conduct physical gold transactions. Gold delivery and receipt can be carried out in the future based on the agreement between the credit institution and the customer and is clearly stated on the Seal/Certificate.

In response to the comments of Agribank and BIDV, the State Bank of Vietnam said it has accepted and will study and issue instructions on this content, including considering amending and supplementing Circular No. 02/2016/TT-NHNN dated February 26, 2016 on asset preservation services, safe deposit box and safe deposit box rental services of credit institutions.

Source: https://vietnamnet.vn/ngan-hang-nha-nuoc-hoat-dong-kinh-doanh-vang-tren-tai-khoan-se-duoc-nghien-cuu-2420900.html