State Bank reports to National Assembly on gold price, restructuring of credit institutions

Financial resources to deal with weak credit institutions in general still have many shortcomings. (Photo: Vietnam+)

The State Bank of Vietnam has just sent a report to the National Assembly on the implementation of Resolution No. 62/2022/QH15 on questioning activities at the 13th Session of the 15th National Assembly (banking sector). In particular, the State Bank focused on reporting and evaluating the implementation of Decree 24 on the management of gold trading activities.

Domestic gold price is 5%-7% higher than world price

According to the State Bank's report, this agency has submitted to the Prime Minister Submission No. 28 dated March 20, 2024 on the summary report and assessment of the implementation of Decree 24. In which, it proposed 4 groups of solutions and 2 groups of recommendations to perform the function of managing the gold market in the coming time.

The State Bank has coordinated with ministries, sectors and localities to comprehensively deploy solutions to handle the high gold price difference, stabilize the gold market, and contribute to stabilizing the macro-economy; directed the State Bank of localities to coordinate with competent agencies to strengthen the work of monitoring the situation, checking and inspecting gold trading activities in the localities.

In addition, the State Bank has requested credit institutions and businesses licensed to trade in gold bars to strictly comply with legal regulations on gold trading activities; and implement the invoice and voucher regime in accordance with the law.

Propose that the Ministry of Public Security, the Ministry of Industry and Trade, and the Ministry of Finance strengthen inspection, supervision, and monitoring according to their assigned functions, tasks, and powers; strictly handle violations of the law such as gold smuggling across the border, manipulation, profiteering, etc., causing instability in the gold market.

Specifically, in 2024, the State Bank coordinated with the Ministry of Public Security, the Government Inspectorate, the Ministry of Industry and Trade, and the Ministry of Finance to organize an interdisciplinary inspection team on compliance with policies and laws in gold trading activities according to Decision 324 dated May 17, 2024. To date, the direct inspection has ended and is in the process of drafting a conclusion report.

In addition, based on current legal regulations, the State Bank has organized direct gold bar auctions to supplement the supply of SJC gold bars to the market. Coordinate with ministries, branches, especially the Ministry of Public Security and local authorities, to ensure security and order, and ensure the effectiveness of intervention plans.

With the synchronous solutions of the State Bank and the effective coordination of functional agencies, the difference between domestic gold prices and world gold prices has been controlled and maintained within a suitable range.

Domestic gold prices are 5%-7% higher than world prices. (Photo: Vietnam+)

According to the State Bank, the domestic gold price is currently 5%-7% higher than the world gold price. The gold market has stabilized, contributing to actively supporting the foreign exchange market, exchange rates and the management of macroeconomic policies. The gap between the world gold price and the domestic gold price has decreased significantly, from the highest level of nearly 20 million VND to now only 3-4 million VND.

Strengthening banking supervision

Also in this report, the State Bank said it will focus on developing and approving projects to restructure weak banks by 2025, fundamentally handling weak banks, and especially not allowing new weak banks to arise.

On October 17, the State Bank announced the decision to compulsorily transfer Vietnam Construction Commercial Bank (CB) to Vietnam Foreign Trade Bank (Vietcombank) and Ocean Bank (OceanBank) to Military Bank (MB) according to the plan approved by the Government.

The remaining "zero dong" bank, Global Petroleum Bank (GPBank), will also be forced to transfer according to the roadmap. The State Bank affirmed that it will continue to exercise special control over Dong A Bank and Saigon Bank (SCB).

In the State Bank's report recently sent to the National Assembly, the State Bank pointed out difficulties and obstacles in restructuring the system of credit institutions associated with handling bad debts.

Firstly, the search and negotiation for a bank that is qualified to receive the mandatory transfer (weak financial capacity, management, and experience in credit organization structure) is long and difficult due to its great dependence on the voluntary participation of commercial banks and the need for time to convince shareholders, especially major shareholders and foreign strategic shareholders.

In addition, the policy mechanism and financial resources to handle weak credit institutions in general and to develop a plan for compulsory transfer of compulsory-purchase banks and Dong A Bank in particular still have many shortcomings and difficulties; the coordination and consultation of relevant ministries and branches still takes a long time because the handling of weak banks is complicated and unprecedented.

In addition, the capacity of some officials and civil servants doing inspection and supervision work is still limited in conditions of pressure to handle large and complicated workloads, with urgent requirements on progress (conducting inspection and supervision work while restructuring weak banks).

The State Bank said it will strengthen supervision of weak banks. (Photo: Vietnam+)

The State Bank aims to reduce bad debt in the entire system (excluding weak commercial banks) to below 3% by the end of 2025, including on-balance sheet bad debt, bad debt sold to the Vietnam Asset Management Company (VAMC) that has not been processed or recovered, and potential debt that has become bad debt.

The State Bank also said that in the coming time, it will continue to closely coordinate with relevant ministries, branches and agencies to implement solutions to fundamentally handle weak credit institutions such as: Resolutely implementing the Project to restructure the system of credit institutions associated with handling bad debts in the period of 2021-2025; focusing on implementing the direction of competent authorities on restructuring and handling weak banks, ensuring stable operations and supporting these banks to gradually recover.

Continue to review, research, advise, amend and supplement relevant documents to complete the legal framework for implementing the Law on Credit Institutions 2024. Direct banks receiving compulsory transfers to complete compulsory transfer plans in accordance with legal provisions and instructions of competent authorities, submit to the Government for approval and implementation.

The State Bank also said it will focus on developing and approving projects to restructure weak banks by 2025, fundamentally handling weak banks and credit institutions, and especially not allowing new weak banks to arise./.

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