Circular No. 18/2011/TT-NHNN dated August 23, 2011 of the State Bank of Vietnam guiding foreign exchange management for medium-and long-term overseas loans of commercial banks being state enterprises

THE STATE BANK OF VIETNAM

Circular No. 18/2011/TT-NHNN of August 23, 2011, guiding foreign exchange management for medium- and long-term overseas loans of commercial banks being state enterprises

Pursuant to June 16, 2010 Law No. 46/2010/QH12 on the State Bank of Vietnam;

Pursuant to June 16, 2010 Law No. 47/2010/QH12 on Credit Institutions;

Pursuant to December 13, 2005 Ordinance No. 28/2005/PL-UBTVQH11 on Foreign Exchange;

Pursuant to the Government’s Decree No. 134/2005/ND-CP of November 1, 2005, promulgating the Regulation on borrowing of overseas loans and payment of overseas debts;

Pursuant to the Government’s Decree No. 160/2006/ND-CP of December 28, 2006, detailing the implementation of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 96/2008/ND-CP of August 26, 2008, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

Pursuant to the Prime Minister’s Directive No. 1568/CT-TTg of August 19, 2010, on implementation of the Political Bureau’s Conclusion No. 78-KL/TW of July 26, 2010;

The State Bank of Vietnam (below referred to as the State Bank) guides foreign exchange management for medium- and long-term overseas loans of commercial banks being state enterprises as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Circular stipulates principles, order and procedures for consideration and borrowing of medium- and long-term overseas loans without government guarantee by commercial banks being state enterprises.

2. Government-guaranteed overseas loans of commercial banks being state enterprises comply with current regulations on grant and management of government guarantee.

3. This Circular applies to commercial banks being state enterprises and organizations and individuals involved in the borrowing of medium- and long-term overseas loans without government guarantee by commercial banks being state enterprises.

Article 2. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Commercial banks being state enterprises (below referred to as state-owned commercial banks) are commercial banks established and operating under the Law on Credit Institutions with over 50% of their charter capital owned by the State.

2. Overseas loan agreement means a written contract or agreement on borrowing of medium- and long-term overseas loans or a debt instrument having capital withdrawal effect and creating debt payment obligation which provides terms and conditions on overseas loans.

3. Modification agreement means a written agreement between related parties in an overseas loan transaction on amendments to a signed overseas loan agreement.

4. Medium- and long-term overseas loans of state-owned commercial banks (below referred to as overseas loans) are state-owned commercial banks’ loans with a term exceeding one (1) year provided by overseas credit institutions or financial institutions being non-residents or overseas loans obtained through issue of international bonds on the international capital market.

5. Safety ratios in credit institutions’ operations (below referred to as safety ratios) are ratios determined under the State Bank’s current regulations on safety ratios in credit institutions’ operations.

6. Loan value is the maximum capital amount to be withdrawn for an overseas loan indicated in an overseas loan agreement or international bond issue plan.

Article 3. Principles of borrowing of medium- and long-term overseas loans by state-owned commercial banks

1. State-owned commercial banks may sign overseas loan agreements only after obtaining the State Bank’s written approval under Chapter II of this Circular.

2. After obtaining the State Bank’s written approval, state-owned commercial banks shall sign overseas loan agreements and register overseas loans under Chapter III of this Circular.

3. State-owned commercial banks are obliged to properly and effectively use loans and pay loan principals and interests as committed in overseas loan agreements, bear all risks and take responsibility before law for the borrowing of overseas loans and payment of overseas debts.

4. In case of issuing international bonds, state-owned commercial banks shall comply with Chapter II of this Circular in proposing the State Bank to approve international bond issue plans. Registration of quota certificates, registration of international bonds to be issued and other relevant matters comply with the State Bank’s guidance on foreign exchange management for issue of international bonds.

5. Withdrawal of capital and payment of overseas loan principals and interests may be conducted only after the registration of overseas loans is certified by the State Bank. State-owned commercial banks may pay charges related to overseas loans only after obtaining the State Bank’s approval of the signing of overseas loan agreements.

Chapter II

PROCEDURES FOR APPROVAL OF OVERSEAS LOANS

Article 4. Dossiers of request for approval of overseas loans

1. Before signing overseas loan agreements or requesting certification of quotas of international bonds to be issued, state-owned commercial banks shall send directly or by post dossiers to the State Bank (the Foreign Exchange Management Department), requesting the State Bank to approve overseas loans or international bond issue plans.

2. A dossier of request for approval of an overseas loan comprises:

a/ A written request for the State Bank’s approval of the signing of the overseas loan agreement;

b/ A copy and a Vietnamese translation of the final draft of the overseas loan agreement;

c/ Final drafts of loan security agreements (if any);

d/ A competent authority’s approval of the overseas loan-borrowing plan under the charter of the state-owned commercial bank;

e/ A report on loan borrowing and use, projected capital sources for loan repayment and loan repayment plan, and plan on prevention of exchange rate and interest rate risks;

f/ A report on the state-owned commercial bank’s compliance with safety ratios at the time nearest to the time of request for the State Bank’s approval of the overseas loan; impacts of the overseas loan and loan use on safety ratios of the state-owned commercial bank.

3. A dossier of request for approval of an international bond issue plan comprises:

a/ A written request for the State Bank’s approval of the international bond issue plan;

b/ The international bond issue plan;

c/ A competent authority’s approval of the international bond issue plan under the charter of the state-owned commercial bank;

d/ A report on the state-owned commercial bank’s compliance with current regulations on safety ratios at the time nearest to the time of request for the State Bank’s approval of the international bond issue plan; impacts of the issued bonds and their use on safety ratios of the state-owned commercial bank.

Article 5. Bases for the State Bank to consider and approve overseas loans or international bond issue plans

1. State-owned commercial banks’ compliance with current regulations on safety ratios.

State-owned commercial banks may take medium- or long-term overseas loans only when complying with current regulations on safety ratios, except the following two cases:

a/ They obtain the Prime Minister’s or State Bank’s written acceptance of their non-satisfaction of one or several safety ratios before taking loans;

b/ Loans are classified as their tier-2 capital and taking such loans will help them comply with regulations on safety ratios.

2. The value of loans or issued bonds is within the country’s total quota of commercial overseas loans annually approved by the Prime Minister.

3. Contents of overseas loan agreements or international bond issue plans do not contravene current Vietnamese laws.

4. They satisfy other requirements under current regulations on foreign exchange management, borrowing of overseas loans and payment of overseas debts, and other relevant regulations.

Article 6. Dossier examination time limit

Within fifteen (15) working days after receiving complete and valid dossiers, the State Bank shall give written opinions on its approval or disapproval of overseas loans or international bond issue plans of state-owned commercial banks. In case of disapproval, the State Bank shall clearly state the reason in writing.

Chapter III

PROCEDURES FOR REGISTRATION OR MODIFICATION REGISTRATION OF OVERSEAS LOANS

Article 7. Order, procedures and dossiers for registration of overseas loans

1. After obtaining the State Bank’s approval, state-owned commercial banks shall sign overseas loan agreements and relevant legal documents. Within thirty (30) days after signing the agreements and before the date of capital withdrawal, state-owned commercial banks shall send directly or by post dossiers of registration of overseas loans to the State Bank.

2. A dossier of overseas-loan registration comprises:

a/ An application for overseas-loan registration (made according to a set form).

b/ A copy and a Vietnamese translation of the signed overseas loan agreement and other legal agreements (if any), enclosed with a written commitment of the state-owned commercial bank’s competent at-law representative on the consistency of the signed agreements with their final drafts previously sent to the State Bank.

Article 8. Time limit for certifying registration of overseas loans

1. The State Bank shall certify registration of overseas loans for state-owned commercial banks within five (5) working days after receiving complete dossiers in the following cases:

a/ Officially signed agreements are consistent with their final drafts previously sent to the State Bank under Article 4 of this Circular.

b/ Officially signed agreements are inconsistent with their final drafts previously sent to the State Bank under Article 4 of this Circular but still comply with Vietnamese law. In this case, state-owned commercial banks should send reports clarifying relevant contents to the State Bank.

2. If a dossier of overseas-loan registration fails to comply with Clause 1 of this Article, within 5 working days after receiving the dossier, the State Bank shall notify such to the state-owned commercial bank for dossier modification.

Article 9. Modification registration of overseas loans

1. If agreements’ modified contents do not contravene current law and retain or reduce loan limits (including the case of cancellation of loans), state-owned commercial banks shall sign modified agreements and register modification of loans under current regulations on management of borrowing of overseas loans and payment of overseas debts of enterprises.

2. In case modified agreements result in the increase of loan limits, state-owned commercial banks shall carry out procedures for requesting approval of such increase as for a new loan under this Circular. After obtaining the State Bank’s written approval, state-owned commercial banks shall sign modified agreements and register modification of loans under current regulations on management of borrowing of overseas loans and payment of overseas debts of enterprises.

3. In case agreements contain modified contents not yet specified in current legal documents, state-owned commercial banks may sign modified agreements and register modification of loans only after obtaining the State Bank’s written approval and guidance.

Chapter IV

REPORTING

Article 10. Regular reporting

1. State-owned commercial banks shall send monthly and annual reports on the borrowing of overseas loans to the provincial-level State Bank branches of localities in which they are headquartered and the State Bank (the Foreign Exchange Management Department), made according to a set form.

2. Reporting deadline:

a/ For monthly reports: The 10th of the subsequent month.

b/ For annual reports: The 31st of January of the subsequent year.

Article 11. Extraordinary reporting

State-owned commercial banks shall make extraordinary reports at the request of the State Bank.

Chapter V

ORGANIZATION OF IMPLEMENTATION

Article 12. Deciding competence

The State Bank Governor may decide to approve or disapprove the borrowing of medium- and long-term overseas loans or international bond issue plans of state-owned commercial banks.

Article 13. Functions, tasks and coordination among units under the State Bank

1. The Foreign Exchange Management Department shall:

a/ Assume the prime responsibility for, and coordinate with concerned units under the State Bank in, handling matters related to medium- and long-term overseas loans of state-owned commercial banks under current law and the Government’s instruction.

b/ Act as the focal point in gathering opinions of concerned units under the State Bank, summarizing such opinions and submitting them to the State Bank Governor for approval of overseas loans or international bond issue plans of state-owned commercial banks.

c/ Notify the State Bank’s approval or disapproval of overseas loans or international bond issue plans of state-owned commercial banks.

d/ Certify registration or modification registration of overseas loans of state-owned commercial banks under this Circular.

e/ Summarize quarterly and annual data and report on the borrowing of overseas loans by state-owned commercial banks to the State Bank Governor.

2. The Banking Inspection and Supervision Agency shall:

a/ Coordinate with the Foreign Exchange Management Department in studying and giving opinions on the borrowing of overseas loans by state-owned commercial banks. Such opinions include those on observance of regulations on safety ratios of state-owned commercial banks having overseas loan dossiers; assessment of overseas loans and their use on safety ratios of state-owned commercial banks; agreement or disagreement (clearly stating reasons) with overseas loans or international bond issue plans of state-owned commercial banks.

b/ Assume the prime responsibility for, and coordinate with concerned units in, inspecting, examining and supervising state-owned commercial banks in borrowing overseas loans and paying overseas debts; handle violations committed by state-owned commercial banks in taking overseas loans.

c/ Join in handling other matters related to overseas loan requests and overseas loans of state-owned commercial banks as instructed by the State Bank Governor.

3. The Monetary Policy Department shall:

a/ Coordinate with the Foreign Exchange Management Department in studying and giving opinions on the borrowing of overseas loans by state-owned commercial banks. Such opinions include those on loan interest rate, borrowing purpose, foreign-currency sources for payment of loan principal and interests, impacts (if any) on the system’s monetary balance caused by overseas loans of state-owned commercial banks, credit structure and capital raising structure of state-owned commercial banks, etc.; agreement or disagreement (clearly stating reasons) with overseas loans or international bond issue plans of state-owned commercial banks.

b/ Join in handling other matters related to overseas loan requests and overseas loans of state-owned commercial banks as instructed by the State Bank Governor.

4. The Legal Department shall:

a/ Coordinate with the Foreign Exchange Management Department in studying and giving opinions on relevant legal matters in overseas loan dossiers of state-owned commercial banks; propose matters in overseas loan dossiers or international bond issue plans of state-owned commercial banks which contravene relevant Vietnamese laws.

b/ Join in handling other matters related to overseas loan requests and overseas loans of state-owned commercial banks as instructed by the State Bank Governor.

5. The Credit Department shall:

a/ Coordinate with the Foreign Exchange Management Department in studying and giving opinions on guarantee and security for overseas loans of state-owned commercial banks; propose agreement or disagreement (clearly stating reasons) with overseas loans or international bond issue plans of state-owned commercial banks.

b/ Join in handling other matters related to overseas loan requests and overseas loans of state-owned commercial banks as instructed by the State Bank Governor.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 14. Effect

1. This Circular takes effect on October 15, 2011.

2. State-owned commercial banks’ medium- and long-term overseas loans for which registration or modification registration had been certified before the effective date of this Circular continue to comply with the State Bank’s written certification of registration or modification registration. In case they reach agreements on modifications after the effective date of this Circular, state-owned commercial banks shall comply with this Circular.

3. State-owned commercial banks’ medium- and long-term overseas loans for which loan agreements are signed before the effective date of this Circular but registration has not yet been certified shall be registered under the State Bank’s guidance on a case-by-case basis.

Article 15. Implementation provisions

The Chief of the Office, the director of the Banking Inspection and Supervision Agency and heads of units under the State Bank, directors of provincial-level State Bank branches, chairpersons of boards of directors and directors general (directors) of state-owned commercial banks shall, within the ambit of their functions, organize the implementation of this Circular.-

State Bank Governor
NGUYEN VAN BINH