Circular No. 28/2012/TT-NHNN dated October 03, 2012 of the State Bank of Vietnam providing on bank guarantee

THE STATE BANK OF VIETNAM

Circular No. 28/2012/TT-NHNN of October 3, 2012, on bank guarantee

Pursuant to June 14, 2005 Civil Code No. 33/2005/QH11;

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. 96/2008/ND-CP of August 26, 2008, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Credit Department;

The Governor of the State Bank of Vietnam promulgates the Circular on bank guarantee.

Chapter I

GENERAL PROVISION

Article 1. Scope of regulation

This Circular provides guarantee operations of credit institutions and foreign bank branches for clients.

Article 2. Subjects of application

1. Credit institutions include commercial banks, cooperative banks and finance companies.

2. Foreign bank branches.

3. The Central People’s Credit Fund pending its transformation into a cooperative bank performing guarantee operations according to regulations applicable to cooperative banks.

4. Organizations (including foreign credit institutions in case of co-guarantee) and individuals related to guarantee operation.

Article 3. Interpretation of terms

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

1. Bank guarantee (below referred to as guarantee) means a form of grant of credit in which the guarantor commits in writing with the guarantee to performing the financial obligation of the guaranteed when the guaranteed fails to perform or fully perform the obligation committed with the guarantee; the guaranteed shall acknowledge debts and repay the guarantor as agreed.  

2. The guarantor means a credit institution or foreign bank branch performing guarantee operation.

3. The guaranteed means an organization (a credit institution or foreign bank branch) or individual being a resident or an organization being a non-resident guaranteed by a credit institution or foreign bank branch.

4. The guarantee means an organization or individual being a resident or non-resident having the right to enjoy guarantee issued by a credit institution or foreign bank branch.

5. Counter-guarantee means a bank guarantee in which a credit institution or a foreign bank branch (the counter guarantor) commits with the guarantor to performing the financial obligation of the guarantor in case the guarantor performs guarantee and pays debts for clients of the counter-guarantor. 

6. Guarantee confirmation means a bank guarantee in which a credit institution or foreign bank branch (the guarantee confirming party) commits with the guarantee that it shall ensure capacity of performing the guarantee obligation of the guarantor for the guaranteed. The guarantee confirming party shall perform the guarantee obligation according to the guarantee confirmation commitment.

7. Co-guarantee means syndication of capital for guarantee by:

a/ Two or more credit institutions or foreign bank branches guaranteeing the  obligation of the guaranteed; or

b/ A credit institution or foreign bank branch together with a foreign credit institution guaranteeing the obligation of the guaranteed.

8. Guarantee granting contract means a written agreement between the guarantor and the guaranteed and related parties (if any) on the rights, obligations and other contents in the performance of guarantee.

9. Guarantee commitment means a written guarantee of the guarantor with the guarantee in one of the following forms:

a/ Letter of guarantee means a written commitment of the guarantor with the guarantee that the guarantor shall perform the financial obligation for the guaranteed when the guaranteed fails to perform or fully perform the obligation committed with the guarantee;  

b/ Guarantee contract means a written agreement between the guarantor and the guarantee or between the guarantor, the guarantee and related parties (if any) that the guarantor shall perform the financial obligation for the guaranteed when the guaranteed fails to perform or fully perform the obligation committed with the guarantee; 

c/ Other forms of commitment as agreed by the parties and not contrary to Vietnamese law.

10. Guarantee for loan means a commitment of the guarantor with the guarantee that the guarantor shall pay debts of the guaranteed when the guaranteed fails to perform or fully or punctually perform the obligation to repay loan. 

11. Guarantee for payment means a commitment of the guarantor with the guarantee that the guarantor shall perform the payment obligation of the guaranteed when the guaranteed fails to perform or fully perform its payment obligation when due.

12. Guarantee for bidding means a commitment of the guarantor with the guarantee (bid solicitor) to secure the guaranteed’s obligation to participate in bidding. If the guaranteed violates bidding regulations and fails to perform or fully perform the financial obligation for participation in bidding, the guarantor shall perform it for the guaranteed.

13. Guarantee for contract performance means a commitment of the guarantor with the guarantee to ensure proper and full performance of the obligations of the guaranteed under the contract signed with the guarantee. If the guaranteed breaches the contract and is fined or has to compensate to the guarantee, but fails to perform or fully perform the financial obligation, the guarantor shall perform it for the guaranteed.

14. Guarantee for product quality assurance means a commitment of the guarantor with the guarantee to assure that the guaranteed shall properly perform agreements on product quality under the contract signed with the guarantee. If the guaranteed breaches agreements on product quality and has to compensate to the guarantee, but fails to perform or fully perform the financial obligation, the guarantor shall perform it for the guaranteed.

15. Guarantee for repayment of advance means a commitment of the guarantor with the guarantee to secure the guaranteed’s obligation to repay the advance under the contract signed with the guarantee. If the guaranteed has to repay the advance but fails to repay or fully repay it, the guarantor shall repay the advance for the guaranteed.

16. Other types of guarantee means types of guarantee that are not prohibited by law and in conformity with international practices, granted by credit institutions or  foreign bank branches at the request of the guaranteed, apart from types of guarantee specified in Clauses 8 through 15 of this Article. 

Article 4. Provisions on foreign exchange management in bank guarantee

1. The grant of guarantee in a foreign currency by credit institutions or foreign bank branches must suit their scope of foreign exchange business and service provision on the domestic and international markets.

2. Credit institutions and foreign bank branches may grant guarantee in a foreign currency for organizations and individuals being residents with respect to the guarantee obligation arising from lawful transactions in a foreign currency.

Article 5. Cases in which guarantee is not permitted or is limited, implementation of guarantee granting limits

1. Cases in which credit institutions and foreign bank branches are not permitted to guarantee are specified in Article 126 of the Law on Credit Institutions.

2. Cases in which guarantee is limited are specified in Article 127 of the Law on Credit Institutions.

3. When granting guarantee, credit institutions and foreign bank branches shall abide by the provisions on guarantee granting limits in Article 128 of the Law on Credit Institutions.

Article 6. Identification of guarantee balance in implementation of provisions on credit granting limits

1. The guarantee balance with respect to the guaranteed and affiliated persons means total balance of guarantee commitments granted under Clauses 8 through 16, Article 3 of this Circular and commitments granted in the form of documentary credit by credit institutions or foreign bank branches to the guaranteed and affiliated persons.

2. When identifying guarantee balance to implement provisions on granting credit limits, credit institutions or foreign bank branches may:

a/ Exclude guarantee balance in the following cases:

- Granting guarantee to the guaranteed being other credit institutions or foreign bank branches;

- Granting guarantee on the basis of counter-guarantee by other credit institutions or foreign bank branches;

- Granting guarantee on the basis of stand-by letters of credit granted by other credit institutions or foreign bank branches;

- Granting a guarantee confirmation at the request of the guarantor being other credit institutions or foreign bank branches, if related parties agree (in writing) that the guarantee confirming party is entitled to account debit entry and request the guarantor to repay the amount which the guarantee confirming party has paid for the guaranteed when having to perform the guarantee obligation.  

b/ To exclude guarantee balance and balance of granting commitments in the form of documentary credit with security assets being deposits in Vietnam dong, foreign currency; gold; government bonds of the guaranteed and/or a third person.

Credit institutions and foreign bank branches shall determine the deduction rate for each type of security asset as prescribed at this Point, on the basis of assessing the possibility of recovery upon handling that security asset, which must not exceed the maximum rate of deduction for security assets according to regulations of the State Bank on classification of current assets, levels and methods of deduction for setting up risk provisions and use of risk provisions in operations of credit institutions and foreign bank branches.

Article 7. Use of language

1. Documents related to guarantee transactions must be made in Vietnamese.

2. If the use of a foreign language is needed, related parties may agree to use an additional foreign language in documents related to guarantee transactions.  In case of different understandings between Vietnamese documents and foreign- language documents, the Vietnamese documents are used as legal grounds.

Article 8. Application of practices and selection of dispute settlement methods

1. The guarantor, the guaranteed and related parties may agree to apply:

a/ International commercial practices promulgated by the International Chamber of Commerce;

b/ Other commercial practices not contrary to Vietnamese law.

2. Parties may agree on the law of application, foreign courts or arbitrators to settle disputes arising from their guarantee transactions in accordance with law.

Chapter II

SPECIFIC PROVISIONS

Article 9. Scope of guarantee obligation

The guarantor may commit to guaranteeing part or the whole of the following obligations of the guaranteed, specifically:

1. Obligation to pay principal debt, interest and other expenses related to the loan.

2. Obligation to pay for purchased materials, goods, machines, equipment and expenses for implementing projects or plans on investment, production, trading or life services.

3. Obligation to pay taxes, charges and other financial obligations to the State.

4. Obligation upon participation in bidding.

5. Obligation in contract performance, assurance of product quality, receipt and repayment of advance money.

6. Other lawful obligations agreed upon by the parties.

Article 10. Conditions on the guaranteed

1. Having full civil legal capacity and civil act capacity as prescribed by law.

2. The guarantee obligation and the transaction from which arises the guarantee obligation are legal.

3. Having capacity to properly and fully perform the committed obligation toward related parties in guarantee relation.

Article 11. Guarantee for organizations being non-residents

1. Cases in which guarantee is permitted:

a/ Credit institutions granting guarantee for the guaranteed are enterprises established and operating overseas with contributed capital of Vietnamese enterprises in the form of offshore direct investment in order to implement projects or  plans on production and business which are suitable to the scope of lawful operation of the guaranteed;

b/ Credit institutions or foreign bank branches guarantee for organizations when:

- The guarantee is a resident, or;

- The guaranteed makes a deposit equal to 100% of guarantee value.

c/ For other cases, guarantee may be granted with written acceptance of the State Bank.

2. Conditions on the guarantor

a/ Credit institutions or foreign bank branches must be licensed by the State Bank to deal in and provide foreign currency services on the international and domestic markets, including guarantee operation in foreign currency;

b/ Within 6 months before the time of consideration of guarantee for organizations being non-residents, credit institutions or foreign bank branches are not sanctioned for administrative violations of regulations on foreign currency management specified in Articles 126, 127, 128 and 130 of the Law on Credit Institutions;    

c/ Having internal regulations and risk administration in guarantee operation for non-residents;

d/ Having a plan on control and handling of risks in guarantee operation for non-residents;

e/ Not violating provisions on reporting to the State Bank on guarantee amounts for non-residents.

3. Conditions on the guaranteed

a/ Being non-residents eligible for consideration for guarantee in accordance with this Circular;

b/ Abiding by Clauses 2 and 3, Article 10 of this Circular;

c/ Having guarantee interests and obligations not contrary to Vietnamese law.

4. Apart from provisions of Clauses 1, 2 and 3 of this Article, other contents in the process of guarantee for non-residents must comply with this Circular.  

Article 12. Dossier of request for guarantee

1. Based on the actual conditions of their guarantee operation and specific characteristics of each target group of clients, credit institutions or foreign bank branches shall specifically guide requirements on types of dossier and document to be sent by clients to credit institutions or foreign bank branches for consideration of guarantee.

2. A dossier of request for guarantee comprises the following main documents:

a/ Written request for guarantee;

b/ Documents on the guaranteed;

c/ Documents on the guaranteed obligation;

d/ Documents on security assets (if any);

Article 13. Guarantee granting contract

1. To perform guarantee, the guarantor, the guaranteed and related parties (if any) shall agree to sign a guarantee granting contract.

2. The principal contents of a guarantee granting contract include:

a/ Applicable legal provisions;

b/ Information on the parties in guarantee relation:

- The guarantor;

- The guaranteed;

- The guarantee;

- Other related parties (if any).

c/ Guarantee amount and currency;

d/ Purpose of guarantee;

e/ Form of issuing guarantee commitment;

f/ Conditions for performance of the guarantee obligation;

g/ Measures to secure the obligation of the guaranteed and value of security assets (if any);

h/ Rights and obligations of the parties;

i/ Guarantee charge;

j/ Terms on exemption from and reduction of the guarantee amount (if any);

k/ Transfer of rights and obligations of the parties;

l/  Commitment to acknowledge and pay debts for the guaranteed, compulsory interest rate of acknowledged debt and repayment of debt (in case the guarantor performs the guarantee obligation);

m/ Settlement of arising disputes;

n/ Serial number, date of signing and effect of the contract;

o/ Other contents.

2. The modification, supplementation or cancellation of a guarantee granting contract must be agreed upon by the parties and decided in accordance with current laws on guarantee and security transactions and other relevant regulations.

Article 14. Guarantee commitment

1. Based on the contents of agreement of the parties in the guarantee granting contract, the guarantor shall issue a guarantee commitment to the guarantee with the following main contents:

a/ Applicable legal provisions;

b/ Serial number and form of guarantee commitment;

c/ Information on the parties in guarantee relation:

- The guarantor;

- The guarantee;

- The guaranteed;

- Other related parties (if any).

d/ Date of issue, starting date of effect of guarantee and/or case in which the guarantee will start to take effect;

e/ The expiry day and/or case of termination of the effect of guarantee;

f/ Guarantee amount and currency used for payment;

g/ Purpose of guarantee;

h/ Scope of the guarantee obligation;

i/ Rights and obligations of the parties (if any);

j/ Provisions on transfer of rights and obligations of the parties (if any);

k/ Conditions for performance of the guarantee obligation;

l/ Terms on exemption from and reduction of the guarantee amount (if any);

m/ Provisions on settlement of arising disputes (if any);

n/ Other contents.

2. The modification, supplementation or cancellation of the contents of guarantee commitment must be agreed upon by related parties.

3. Credit institutions and foreign bank banches shall base themselves on the contents of the guarantee granting contracts and guarantee commitments specified in this Circular and relevant laws to design, print and issue a form of guarantee commitment for guarantee operation in their entire system according to their internal regulations. The design, printing, issuance and use of the form of guarantee commitment must be carried out, managed and supervised regularly like valuable papers in order to assure safety in the issuance of guarantee commitments.

4. For guarantee commitments issued through the international information and communication network among banks, apart from performing the process of issuing guarantee commitments through the international information and communication network among banks, the guarantor must have a process for supervising and managing the guarantee issuance through this network in a safe and effective manner.

Article 15. Competence to sign guarantee granting contracts and guarantee commitments

1. The guarantee granting contract and guarantee commitment of the guarantor must be signed by:

a/ At-law representative;

b/ The manager of risks of guarantee operation;

c/ The appraiser of guarantee amount.

2. Credit institutions and foreign bank branches shall provide in writing for the authorization of the signing of guarantee granting contracts and guarantee commitments to their at-law representatives, managers of risks of guarantee operation and appraisers of guarantee amounts in their system or issue documents providing the competence to sign guarantee documents in accordance with this Circular and law.

Article 16. Security for the obligation of the guaranteed

1. Credit institutions and foreign bank branches and the guaranteed shall agree on the application or non-application of security measures.

2. Credit institutions and foreign bank branches shall provide conditions for and principles of application of each security measure and conditions and principles for cases of non-application of security measures in guarantee operation which are suitable to characteristics and management requirements of each type of client and their own characteristics and situation on the basis of compliance with the laws on guarantee and security transactions.

If not applying the security measure with assets (guarantee of a third person and/or pledge of trust and/or unsecured) for the guarantee amount, the guaranteed must meet the following minimum conditions:

a/ Fully meeting the conditions specified in Article 10 or in Clause 3, Article 11 of this Circular;

b/ Being a client who is eligible for credit granted by the credit institution or foreign bank branch without applying the security measure with assets;

c/ At the time of requesting guarantee, committing no violation related to credit granting and payment at the credit institution or foreign bank branch.

3. If the guarantor uses assets of a third person to secure the guarantee amount, credit institutions or foreign bank branches shall specify conditions for security assets and conditions for third persons on the principle of safe and effective assurance. 

4. The establishment of a security measure for the whole or part of the obligation of the guaranteed by the guarantor shall be agreed by the parties.

Article 17. Guarantee charge

1. The guarantor may agree on a guarantee charge with the guaranteed. For counter-guarantee or guarantee confirmation, the level of guarantee charge may be agreed by the parties on the basis of the guarantee charge accepted by the guaranteed.

2. In case of co-guarantee, the parties shall agree on the level of guarantee charge enjoyable by each party on the basis of agreement on the proportion of participation in co-guarantee and the charge amount collected from the guaranteed.

3. If credit institutions or foreign bank branches guarantee for an associated obligation, they shall agree with each client on the payable charge on the basis of the associated obligation corresponding to each client.

4. If the guarantee currency is a foreign currency, the parties may agree to collect the guarantee charge in the foreign currency or convert it into Vietnam dong at the selling exchange rate applied by the guarantor at the time of charge collection.

5. In the guarantee period, the parties may agree to adjust the charge level.

Article 18. Guarantee period

1. The guarantee period must be determined from the guarantee-issuing day or when such guarantee takes effect as agreed upon by the guarantor with related parties to the time of expiration of guarantee indicated in the guarantee commitment. If the guarantee commitment does not specify a time of expiration of guarantee, the time of expiration of guarantee is the time of expiration of the guarantee obligation as prescribed in Article 21 of this Circular.

2. If the expiration day falls on a non-working day or public holiday, it will be shifted to the following working day.

3. Extension of guarantee may be agreed upon by the parties.

Article 19. Exemption from performance of the guarantee obligation

1. If the guarantee exempts performance of the obligation for the guarantor, the guaranteed and/or related parties shall still perform the obligation they have commited with the guarantee, unless otherwise agreed by the parties, or shall perform the associated obligation as prescribed by law.

2. If one of co-guarantors is exempted from performance of part of the guarantee obligation which is the obligation of such member, the other co-guarantors shall still perform their guarantee obligation as committed.

Article 20. Performance of guarantee obligation

1. In the guarantee period, the guarantor or guarantee confirming party shall perform the guarantee obligation when the guarantee produces a request for performance of the guarantee obligation enclosed with legal and valid dossiers, records and documents (if any) fully satisfying the conditions stated in the guarantee commitment or guarantee confirming commitment. Within 5 (five) working days after the guarantee has fully presented the dossier of request for performance of the guarantee obligation, the guarantor or guarantee confirming party shall fully and properly perform the guarantee obligation to the guarantee. If refusing to perform the guarantee obligation, the guarantor or guarantee confirming party shall reply in writing, clearly stating the reason.

2. Immediately after performing the guarantee obligation, the guarantor or guarantee confirming party shall, based on the commitment to acknowledge and pay debt for the guaranteed in the guarantee granting contract or commitment of the parties, and on records and documents evidencing the performance of the guarantee obligation, account debit entry into the compulsory loan account for the amount paid for the debt of the guaranteed or counter-guarantor or guarantor in the guarantee confirmation and send a written notice of the payment of the guaranteed’s debts to the parties related to the guarantee amount.  

3. The parties having their debts paid are obliged to immediately repay the amount which the guarantor or guarantee confirming party has paid for their debts. If they are unable to repay the paid amount, based on the guarantee granting contract or commitment of the parties, the guarantor or guarantee confirming party shall decide on the term of compulsory loan, term of paying debts and lending interest rate applied to the amount paid for the guaranteed or counter guarantor or guarantor in the guarantee confirmation. The applied lending interest rates must not exceed 150% of normal lending interest rates applied to loans with a similar term. The point of time used to determine the term of lending for loans is the day when the guarantor or guarantee confirming party pays debts for the guaranteed.

4. In case of paying debts for the guaranteed in a foreign currency, after having implemented the provisions of Clauses 1, 2 and 3 of this Article, credit institutions or foreign bank branches shall account debit entry of compulsory loan as follows:

a/ Accounting debit entry in the foreign currency according to the guarantee commitment, or

b/ Accounting debit entry in Vietnam dong corresponding to the value of foreign currency which credit institutions or foreign bank branches have paid debts for the guaranteed at the selling exchange rate of the guarantor announced at the time of payment on the basis of their capacity to balance foreign currency.

Article 21. Termination of the guarantee obligation

The guarantee obligation of the guarantor is terminated in the following cases:

1. The obligation of the guaranteed is terminated.

2. The guarantor has performed the guarantee obligation according to the guarantee commitment.

3. The guarantee is canceled or replaced by another security measure.

4. The effect of the guarantee commitment expires.

5. The guarantee exempts performance of the guarantee obligation for the guarantor.

6. The guarantee obligation is terminated in other cases as prescribed by law.

7. Under agreement of the parties.

Article 22. Co-guarantee

1. Principles, conditions, process of organizing the performance of co-guarantee comply with this Circular, regulations of the State Bank on granting syndicated credit of credit institutions or foreign bank branches for clients, and relevant laws.

2. Co-guarantors may perform co-guarantee for organizations and individuals being residents and organizations being non-residents.  In case of co-guarantee for organizations being non-residents, the parties shall comply with the provisions of Article 11 of this Circular.

3. Co-guarantors shall take joint responsibility for performance of the guarantee obligation, unless otherwise agreed upon. If credit institutions or foreign bank branches are focal points to perform the guarantee obligation for the guaranteed, the involved parties shall immediately repay credit institutions or foreign bank branches being focal points the amounts corresponding to the proportions of participation in the co-guarantee as agreed upon by the parties.

4. When performing co-guarantee for organizations being non-residents, credit institutions and foreign bank branches shall make reports according to Form No.01 and Form No.02 according to the rate of guarantee and rate of paying debts for such organizations.

Article 23. Guarantee for an associated obligation

Credit institutions and foreign bank branches shall perform guarantee for an associated obligation on the basis of a contract on associated rights and obligations of the parties.

Article 24. Internal regulations of credit institutions and foreign bank branches on guarantee

1. Pursuant to this Circular and relevant laws, credit institutions and foreign bank branches shall issue internal regulations on guarantee operation applicable to organizations and individuals being residents and organizations being non-residents.

2. Credit institutions and foreign bank branches shall send 1 (one) copy of the internal regulations on guarantee operation to the Credit Department right after issuing or amending and supplementing them.

Article 25. Rights of the guarantor

1. To accept or refuse requests for guarantee granting of the guaranteed or counter-guarantor.

2. To request the guarantee confirming party to confirm guarantee for its guarantee amount for the guaranteed.

3. To ask the guaranteed, the counter-guarantor and related parties to provide documents and information relating to the appraisal of guarantee and security assets (if any).

4. To request the guaranteed to apply security measures for obligations guaranteed by credit institutions or foreign bank branches (when necessary).

5. To collect guarantee charges or adjust guarantee charge rates; to apply and adjust interest rates and punitive interest rates as agreed.

6. To refuse performance of the guarantee obligation when the guarantee commitment expires or the dossier of request for guarantee payment fails to meet the conditions specified in the guarantee commitment, or having evidence to prove that the presented documents are fake.

7. To account debit entry for the guaranteed or counter-guarantor immediately after performing the guarantee obligation, request the guaranteed or counter-guarantor to immediately repay on the same day the amount which the guarantor has paid as committed.

8. To request other co-guarantors to immediately repay on the same day the amount which it has paid for the guaranteed in the case the member being the focal point has performed the guarantee obligation in co-guarantee.

9. To handle security assets as agreed upon and prescribed by law.

10. To transfer its rights and obligations to other credit institutions or foreign bank branches as agreed by related parties and accepted by the State Bank on a case-by-case basis.

11. To initiate lawsuits in accordance with law when the guaranteed or counter-guarantor violates committed obligations.

12. Other rights as agreed upon by the parties in accordance with law.

Article 26. Rights of the counter-guarantor

1. To accept or refuse requests of clients for issuance of counter-guarantee.

2. To request the guarantor to issue guarantee for obligations of its clients with respect to the guarantee.

3. To request clients to provide documents and information relating to the appraisal of counter-guarantee and security assets (if any).

4. To request clients to take security measures for obligations counter-guaranteed by credit institutions or foreign bank branches (when necessary).

5. To collect guarantee charges as agreed.

6. To refuse to perform the counter-guarantee obligation when the guarantee commitment is expired or the dossier of request for payment fails to fully meet the conditions specified in the guarantee commitment, or when having evidences that the presented documents are fake.

7. To account debit entry for the guaranteed immediately after performing the counter-guarantee obligation for the guarantor, request the guaranteed to repay immediately on the day the amount which the counter-guarantor has paid to perform the counter-guarantee obligation for the guarantor as committed.

8. To handle security assets of the guaranteed as agreed and prescribed by law.

9. To initiate lawsuits in accordance with law when the guaranteed or guarantor violates committed obligations.

10. To transfer its rights and obligations to other credit institutions or foreign bank branches as agreed upon by related parties and accepted by the State Bank on a case-by-case basis.

11. Other rights as agreed upon by the parties in accordance with law.

Article 27. Rights of the guarantee confirming party

1. To agree or refuse requests of the guarantor or clients for guarantee confirmation.

2. To request clients or the guarantor to provide documents and information relating to the appraisal of guarantee and security assets (if any).

3. To request clients or the guarantor to take security measures for the obligations already confirmed by the guarantor (when necessary).

4. To agree with the guarantor and/or clients on the obligation to confirm guarantee, collection of guarantee confirmation charge and the order and procedures for repayment for the obligation to confirm guarantee which the guarantee confirming party has performed for the guarantee.

5. To account debit entry for the guarantor or guaranteed immediately after performing the obligation to confirm guarantee, request the guarantor or guaranteed to repay immediately on the same day the amount which the guarantee confirming party has paid for them as committed.

6. To handle security assets of the guarantor or guaranteed as agreed or provided by law.

7. To initiate lawsuits in accordance with law when the guaranteed and the guarantor violate the committed obligations.

8. To transfer its rights and obligations to other credit institutions or foreign bank branches as agreed by related parties and accepted by the State Bank on a case-by-case basis.

9. To refuse to perform the guarantee obligation when the guarantee commitment is expired or dossier of request for payment fails to meet the conditions specified in the guarantee commitment, or having evidences that the presented documents are fake.

10. Other rights as agreed upon by the parties in accordance with law.

Article 28. Obligations of the guarantor, counter-guarantor and guarantee confirming party

1. To fully provide information and documents related to the guarantor’s competence to issue guarantee commitments and perform guarantee obligations for the guaranteed, the guarantee and related parties (if any) upon request.

2. To inspect and supervise compliance with guarantee commitments by the guaranteed during the valid term of guarantee amounts.

3. To fully and properly perform the guarantee obligation immediately after the guarantee fully produces legal and valid dossiers, records and documents as stated in the guarantee commitments and guarantee confirming commitments on the performance of the guarantee obligation by the guarantor and the guarantee confirming party.

4. The counter-guarantor in counter-guarantee or the guarantor in guarantee confirmation has the obligation to repay immediately on the same day the amount the guarantor in counter-guarantee or the guarantee confirming party has paid for the guaranteed.

5. To fully return security assets (if any) and relevant documents to the guaranteed when liquidating guarantee granting contracts.

6. To issue written replies to written complaints of clients about reasons for refusal of performance of guarantee within 10 (ten) working days after receiving such complaints.

7. To preserve guarantee dossiers as prescribed by law.

8. Other obligations as agreed upon by the parties in accordance with law.

Article 29. Rights and obligations of the guaranteed

1. The guaranteed has the following rights:

a/ To refuse requests of the guarantor, the counter-guarantor and the guarantee confirming party which are inconsistent with agreements in guarantee granting contracts or guarantee commitments;

b/ To request the guarantor, the counter-guarantor and the guarantee confirming party to properly perform their obligations and responsibilities as committed.

c/ To initiate lawsuits in accordance with law when the guarantor, counter-guarantor or guarantee confirming party violates the commited obligations;

d/ To perform its rights and obligations as prescribed by law when related parties transfer their guarantee rights and obligations with respect to guarantee amounts.

2. The guaranteed has the following obligations:

a/ To provide ful, accurate and truthful information and documents related to guarantee amounts and take responsibility before law for the accuracy, truthfulness and completeness of such information and documents;

b/ To fully and timely perform obligations and responsibilities as committed and agreements specified in guarantee granting contracts;

c/ To repay immediately on the same day the amounts paid for the guaranteed by the guarantor, the guarantee confirming party and the counter-guarantor to perform their obligation under the guarantee granting contracts or commitments between the parties, and expenses arising from performance of the guarantee obligations;

d/ To submit to the inspection, control and supervision of its responsibilities and obligations to perform guarantee by the guarantor, the counter-guarantor and the guarantee confirming party.  To report on operations related to guarantee transaction to the guarantor, the counter-guarantor and the guarantee confirming party;

e/ To voluntarily and unconditionally coordinate with the guarantor, the counter-guarantor, the guarantee confirming party and related parties in handling security assets (if happening);

f/ Other obligations as agreed upon by the parties in accordance with law.

Article 30. Rights and obligations of the guarantee

1. Rights of the guarantee

a/ To request the guarantor and the guarantee confirming party to properly perform obligations and responsibilities according to guarantee commitments;

b/ To initiate lawsuits in accordance with law when the guarantor or guarantee confirming party violates the committed obligations;

c/ To check the legality and validity of guarantee commitments.

2. Obligations of the guarantee

a/ To properly and fully perform obligations in contracts related to the guarantee obligation, assuring conformity with the contents of guarantee commitments;

b/ To timely notify the guarantor, the guarantee confirming party and related parties of signs and acts of violation committed by the guaranteed.

Chapter III

REPORTING, ORGANIZATION OF IMPLEMENTATION

Article 31. Accounting, information and reporting

1. Credit institutions and foreign bank branches shall perform accounting and keep track of all arising guarantee amounts according to regulations.

2. Credit institutions and foreign bank branches shall report on guarantee performance according to regulations on statistical reports of the State Bank and the provisions of this Circular.

3. Credit institutions and foreign bank branches shall report on guarantee amounts for organizations being non-residents according to Form No. 01 within 2 (two) working days after issuing guarantee commitments and report on amounts paid for debts of organizations being non-residents according to Form No. 02 within 1 (one) working day after paying debts and accounting debit entry for organizations being non-residents.

4. Credit institutions and foreign bank branches shall continue to report on amounts paid for debts of organizations being non-residents according to the regime of reporting on lending and collecting foreign debts as prescribed by the law on foreign exchange management regarding the lending and collection of  foreign debts by credit institutions and foreign bank branches if after 1 (one) month from the day of paying debts and accounting debit entry, the organizations being non-residents fail to pay all debts for credit institutions or foreign bank branches.

5. To sum up and report according to Form No.03 figures of guarantee for organizations being non-residents and send them to the State Bank (the Credit Department).

Article 32. Organization of implementation

1. Responsibilities of the Credit Department

a/ To act as the focal point to receive internal regulations on guarantee operation of credit institutions and foreign bank branches as prescribed in Article 24 of this Circular; to monitor and summarize the performance of guarantee operations of credit institutions and foreign bank branches.

b/ To act as the focal point to handle problems related to guarantee operation;

c/ To act as the focal point to monitor and handle cases specified at Point e, Clause 2, Article 11; Clause 10, Article 25; Clause 10, Article 26; and Clause 8, Article 27 of this Circular.

2. Responsibilities of the Banking Inspection and Supervision Agency

a/ To assume the prime responsibility for, and coordinate with related units in, examining, inspecting and supervising the guarantee operation of credit institutions and foreign bank branches, and handling violations according to its competence;

b/ To provide the Credit Department with information on the compliance with regulations on assurance of safety in operations of credit institutions and foreign bank branches related to guarantee operation, and credit institutions and foreign bank branches that have been handled for their violations in guarantee operation.

3. Responsibilities of the Finance and Accounting Department

To guide the accounting of transactions related to guarantee operation of credit institutions and foreign bank branches in accordance with this Circular.

4. Responsibilities of the Foreign Currency Management Department

To monitor and manage capital flows related to credit institutions and foreign bank branches paying debts for guaranteed parties that are organizations being non-resident persons and debts collected from these debt payments.

5. Responsibilities of State Bank branches of provinces and centrally run cities

To monitor, examinate and inspect credit institutions and foreign bank branches in their compliance with this Circular according to their functions and tasks; and report to the Governor of the State Bank on cases of violation and handling of violations according to their competence.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 33. Transitional provisions

The guarantee commitments signed before the effective day of this Circular continue to be performed under signed agreements until the guarantee obligation is terminated. These commitments may be modified and supplemented if the contents of modification and supplementation are compliant with this Circular.

Article 34. Effect

1. This Circular takes effect on December 2, 2012, and replaces the State Bank of Vietnam’s Decision No. 26/2006/QD-NHNN of June 26, 2006, promulgating the Regulation on bank guarantee.

2. The Chief of the Office, the director of the Credit Department, heads of related units under the State Bank, directors of the State Bank branches of provinces and centrally run cities, chairpersons of the Boards of Directors or Members’ Councils and directors general (directors) of credit institutions and foreign bank branches, and organizations and individuals related to guarantee operation shall implement this Circular.-

For the Governor
Deputy Governor
NGUYEN DONG TIEN

* All forms mentioned herein are not translated.-