Vietnam - G5+1 found applying black market’s exchange rate

by lexie Sun Oct 23, 2011 8:45 am

Oct.22,2011

G5+1 found applying black market’s exchange rate

VietNamNet Bridge – The exchange rate quoted by commercial banks was adjusted nine times in the last 20 days, thus making the foreign currency market burning. This has been partially attributed to the fact that G5 (the five commercial banks assigned the task of stabilizing the gold market) are collecting dollars in large quantities after selling 10 tons of gold.

In fact, the “dual exchange rate” has been existing for a long time in the banking system – the exchange rate officially quoted by commercial banks and the actual exchange rate applied in transactions.

To date, only businesses have been complaining that they have to buy dollars at the prices higher than the quoted prices. However, the commercial banks, which join the activities to stabilize the gold market, have turned out to be the ones that most complain about the high dollar prices.

Nguyen Cong Tuong, a senior executive of SJC, a member of G5+1 group (5 banks and 1 company), said that it could not define the gold sale price based on the official exchange rate, because it had to buy dollars at the black market’s price which is always higher than the official exchange rate.

Meanwhile, managers of G5 banks do not admit that they are applying the black market’s exchange rate when setting up the sale prices. However, they are still selling gold at high prices, explaining that they need to sell gold at the market prices or they would not have enough gold to sell.

While G5+1 tries to explain why the gold price stays firmly high despite the efforts to stabilize the market, the exchange rate has been fluctuating all the time.

October 6 was the day when G5+1 began selling gold under the gold price stabilization program. Meanwhile, since October 5, the interbank exchange rate has been adjusted nine times, pushing the dollar price up by 109 dong in total, reaching the 6-month highest peak.

However, the nine consecutive times of adjusting the exchange rate proves to be not enough. Under the current regulations, the dollar price quoted by commercial banks must not be higher by more than one percent than the interbank exchange rate announced daily by the State Bank of Vietnam.

This means that when the State Bank announced the exchange rate of 20,733 dong per dollar for October 19, commercial banks must not trade dollars at more than 20,940 dong per dollar.

However, in fact, buyers had to buy dollars at the prices which were much higher than the quoted prices. A business said it bought dollars on October 19 afternoon at 21,700 dong per dollar, which was even higher by 50-100 dong per dollar than the black market’s price.

A bank officer of a bank branch in HCM City said that banks now have to the black market in collecting dollars by offering higher purchase prices; therefore, they have to sell dollars at high prices. “The dollar supply shortage has been occurring for one week already,” she said.

VnExpress newspaper has quoted a member of the National Advisory Council for the Monetary Policies as saying that the dollar price has been increasing recently, partially because of the happenings on the gold market.

G5+1 sold a big amount of gold and got a big volume of dong. As they still cannot buy gold in to balance their stocks, they need to convert the dong into dollars. An expert said that G5+1 group’s members have to use a part of the dollars they buy to make deposit on their accounts for overseas transactions, and another part to store to protect their assets. They also need to keep dollars in case they need to import more gold. Therefore, banks now have to buy dollars in large quantities, which has led to the high demand for dollar on the market.

After one week of joining the activities to stabilize the market, SJC and the five banks have sold 10 tons of gold worth 600 million dollars

http://english.vietnamnet.vn/en/business/14431/g5-1-found-applying-black-market-s-exchange-rate.html