HANOI(BullionStreet): Only a handful out of the more than 12,000 gold shops in Vietnam will exist after January 30 next year as any companies not licensed by the country's central bank must get out of the gold bar business there after.

Vietnamese authorities are considering applications from 21 enterprises seeking permission to continue trading in gold bars by passing tightened regulations.

The State Bank of Vietnam is checking the applications and the capability of banks before it grants the first licenses, slated for the end of December.

Only commercial banks to be licensed by the State Bank of Vietnam would be able to trade gold. Most of the commercial banks submitted applications can meet the requirements to be eligible for trading bullion gold, even though the requirements are very high.

Under the government Decree No. 24, credit institutions must meet three requirements to be able to trade bar gold.

They must have the chartered capital of three trillion dong at least, register gold trade activities and have the branches in at least five central cities or provinces.

Sources said that only several banks would be licensed in the first phase, while the others may get the licenses in 2013.

Analysts saidcommercial banks believe this is a lucrative business field to trade bullion gold. However, experts have warned that it would not be so easy to make profits.

A lot of banks have made fat profits from bullion gold trading, but many others have reported big losses of trillions of dong from the business.

Analysts say in the current conditions, when the dong outstanding loans increase slowly, banks would think of trading gold as an attractive business.

However, there would be a lot of challenges for banks to trade gold, especially when they are required to have reasonable daily gold position.

Banks would be able to trade bar gold like gold enterprises, they would have to follow the regulations on the gold position like the ones currently applied to foreign currency trade.

The difference between the requirements on the gold and foreign currency positions is that banks can hold the minus position (+/-20 percent) with foreign currencies, but they must obtain positive position with gold by the end of every day.

This means that only when banks can buy gold, will they be able to sell gold. It’s still unclear about how high the positive position would be. But some sources said this could be only one percent. If so, a bank with the chartered capital of 3 trillion dong would be able to use 30 billion dong to trade gold, or 30 taels of gold, which is not worth while.

Meanwhile, banks would have to pay high expenses for gold transportation, and the gold price would fluctuate by no more than 5-7 percent. This means that banks need to consider if the profits to be made are high enough to cover expenses and risks.