The State Bank of Vietnam (SBV) is getting stricter on managing the local foreign exchange market with a new draft law, which is said to help the agency implement its de-dollarization scheme.

If the draft law of the central bank comes into effect, no foreigners will be permitted to deposit the greenbacks in local banks.

If they want to do so, they will have to convert the US dollar to Vietnamese dong beforehand, or else they will be violating the law, according to a draft decree.

This decree replaces Decree No.160 of SBV which gives the guidelines for the implementation of the National Ordinance on Foreign Exchange.

The draft law has been sent to relevant state agencies and government bodies for comments before being submitted to the Government in December 2013 for final approval.

All hands on “de-dollarization”

A member of the board drafting the decrees from the central bank told Tuoi Tre that the new law’s main objective is for the national de-dollarization scheme, so it should focus on restricting transactions in foreign currency within Vietnam.

Therefore, the new regulation emphasizes that all transactions made in Vietnam should be conducted via the local currency, the Vietnamese dong, except in some special cases, like foreign exchange transactions between local/foreign financial institutions. "In the past few years, the supervision agency under the central bank has detected so many cases of trading huge volumes of foreign currencies illegally, but when caught red-handed, they said they just gave the money to each other,” the official said.

Regarding the question that the prohibition came out as a result of the fact that the state authorities found it hard to manage the market, the official said the law aims at restricting, not banning, transactions in foreign currieries.

"Compared with the current regulations, the new ones may be a little troublesome for people who have to exchange foreign currency to the dong.”

The SBV also mentioned the provisions in depositing foreign currency, stating that they remain unchanged. Specifically, Vietnamese citizens who have foreign currency deposited at credit institutions are still allowed to withdraw principal and interest in foreign currency.

In fact, due to the differentiation in the interest rate in foreign currencies, especially the US dollar, locally and internationally, a number of foreign individuals have deposited the greenbacks at local banks to benefit financially.

The problem occurs when they withdraw all the principal and interests from their savings accounts, causing pressure on the foreign exchange market, especially during tense periods.

Another official from the board said the ordinances have already banned this, but somehow the provisions of Decree 160 did the opposite. Therefore, the draft regulation allowing only local residents to deposit foreign currencies at local banks is in accordance with the original law.