Gold sink banks
02-11-2012 06:18:35+07:00
Gold sink banks
The commercial banks, which once rushed to mobilize gold deposits now have to pay the penalty for their decisions.
Pay penalty for the greed?
When the dong deposit interest rates kept escalating to 20-25 percent per annum, banks found one solution that could help them reduce the capital mobilization costs: mobilizing gold deposits, converting for dong for lending.
Bankers believed that even if the gold price fluctuated by 5-7 percent, the interest rate gap between dong deposits and gold deposits would be high enough to bring them fat profits.
The bankers could not imagine that the gold price would increase dramatically by 300 percent, which has prompted people to sell gold to make profit. Meanwhile, the State Bank of Vietnam has repeatedly urged commercial banks to gradually stop mobilizing gold deposits and lending in gold.
As such, it’s now the time for commercial banks to collect gold on the market to cover their liquidity and pay gold back to depositors.
An official of the State Bank of Vietnam has commented that at this moment, when the gold price is sky high, no one would buy gold except the banks which need gold to pay debts.
Especially, banks have been hurrying to buy gold recently, since the State Bank has decided that they would have to stop mobilizing gold deposits on November 25, 2011.
Sources have said that the three biggest banks, which meet difficulties in implementing the State Bank’s order to stop gold transactions from November 25, need some 8 tons of gold more.
Of the three banks, the Asia Commercial Bank’s (ACB) gold position is minus 100,000 taels, or 3.75 tons. Meanwhile, the figure for Eximbank is 26,000 taels, or 975 kilos, and the figure for the whole banking system could be 20 tons.
Two questions have been raised that what will happen when banks rush to buy gold in big quantities within one month and if it is feasible to collect 20 tons of gold just within a short time.
Everything has its breaking point
Experts have every reason to question if banks can collect enough gold just within a short time. In general, the last months of years are the time to worry about the liquidity.
It is the high production season, when enterprises need bank loans to organize production for year-end and Tet sale, and need cash to pay salaries and bonuses to their workers. As such, this may be an “impossible mission” for banks to both arrange enough cash to satisfy the high loans demand and to collect gold to pay gold back to depositors.
Sources have said that credit institutions have bought over 60 tons of gold only over the last six months. This means that they would need at least two more months to buy the 20 tons of gold they need.
A banking expert has said that a lot of commercial banks have incurred big losses from gold deposits.
An analysis report by Vietcombank Securities Company showed that if having to buy gold in the fourth quarter of 2012, ACB would incur the loss of 200 billion dong. In the first nine months of the year, the bank’s post tax profit was 896.4 billion dong, down by 57.3 percent in comparison with the same period of the last year, which has been attributed to the losses form gold mobilization.
vietnamnet
