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Overseas Health Insurance News: Foreign currency deposits could be banned in Vietnam

The State Bank of Vietnam has revealed a draft decree to prohibit expatriates from opening savings accounts in foreign currencies.

If it goes ahead, the new rule will supersede decree number 160, which currently governs the 2005 Foreign Exchange Ordinance, reports the Thanh Nien newspaper.

The central bank is proposing the move as a way to prevent the practice by some foreigners of having currencies sent from their countries of origin and deposited into such accounts in order to take advantage of the high interest rates in Vietnam.

By doing this, expats are putting pressure on the foreign exchange market, which is already strained, representatives from the bank told online newspaper VnEconomy.

At the end of October American dollars had an interest rate of 1.25 per cent and the London Interbank Offered Rate (Libor) stood at 0.6 per cent.

Vietnam was entering the World Trade Organization in 2006 when decree number 160 was issued, meaning several of the provisions were relaxed.

Now the bank is keen to see the regulations brought back in line with the 2005 ordinance, allowing Vietnamese nationals and no others to deposit cash into savings accounts in foreign currency.

If the draft decree were put in place it would also ban Vietnamese people from gifting foreign money, as this is a loophole that has been exploited by those illegally trading currencies.

When caught they say that they are giving the money as a present and are therefore not breaking the law.

But many experts suggest that this would be infringing on people's freedoms, as it is not illegal to possess foreign notes and these are often given during significant festivities.

For example, $2 bills are seen as lucky and are therefore given during the Lunar New Year celebrations, known as Tet.

Another area which would be affected should the decree come into effect, would be the remittances sent by Vietnamese people living overseas back to their families in the country.

These account for $10 billion (£6 billion) a year and are not usually converted into dong before being sent.

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