Circular No. 36/2018/TT-NHNN dated December 25, 2018 of the State Bank of Vietnam on lending by credit institutions and foreign branch banks for outward investment

CIRCULAR

Prescribing the provision of loans by credit institutions and foreign bank branches to their clients for offshore investment^[1]

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions and the November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the November 26, 2014 Law on Investment and the November 22, 2016 Law Amending and Supplementing Article 6 of, and Appendix 4 on the List of Sectors and Trades Subject to Conditional Business Investment to, the Law on Investment;

Pursuant to the December 13, 2005 Ordinance on Foreign Exchange and  the March 18, 2013 Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 70/2014/ND-CP of July 17, 2014, detailing a number of articles of the Ordinance on Foreign Exchange and the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 83/2015/ND-CP of September 25, 2015, prescribing offshore investment;

Pursuant to the Government’s Decree No. 124/2017/ND-CP of November 15, 2017, prescribing offshore investment in petroleum activities;

Pursuant to the Government’s Decree No. 16/2017/ND-CP of February 17, 2017, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Credit Department of Economic Sectors;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing the provision of loans by credit institutions and foreign bank branches to their clients for offshore investment.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

This Circular prescribes the provision of loans by credit institutions and foreign bank branches (below collectively referred to as credit institutions) to their clients for offshore investment in the forms specified at Points a, b, c and dd, Clause 1, Article 52 of the Law on Investment.

Article 2.Subjects of application

1. Credits institutions, including:

a/ Commercial banks;

b/ Non-bank credit institutions;

c/ Foreign bank branches.

2. Clients being investors in accordance with the Law on Investment and guiding documents (excluding credits institutions). For investors being households, cooperative groups or other organizations having no legal person status that are engaged in loan relationships, their members shall be the subjects who participate in the establishment and performance of such loan relationships or shall authorize their representatives to participate in the establishment and performance of the loan relationships.

3. Other related organizations and individuals.

Article 3.Application of relevant legal documents

Credit institutions shall provide loans to their clients for offshore investment in accordance with this Circular. For the issues not yet mentioned in this Circular, credit institutions shall comply with the State Bank’s regulations on the provision of loans by credit institutions to their clients, limits and prudential ratios in operations of credit institutions, foreign exchange management, internal control, statistical reporting, and risk classification, provisioning and handling, and other relevant legal documents.

Article 4. Demands for loans for offshore investment

A credit institution may provide loans to clients that need loans for:

1. Contributing charter capital to establish an economic organization in accordance with the law of the host country.

2. Contributing capital to perform business cooperation contracts (BCC) overseas.

3. Redeeming part or the whole of the charter capital of an overseas economic organization to participate in managing and carrying out overseas business investment activities.

4. Making offshore investment in the form prescribed at Point dd, Clause 1, Article 52 of the Law on Investment and guiding documents.

Article 5.Lending conditions

Credit institutions shall consider and decide on the provision of loans to clients for offshore investment that meet the following conditions:

1. Having civil legal capacity in accordance with law, for clients being legal persons. Reaching full 18 years of age or older and having full civil act capacity in accordance with law, for clients being individuals (including individuals who are members or authorized representatives of households, cooperative groups or other organizations having no legal person status).

2. Having obtained offshore investment registration certificates, and having investment activities approved or licensed by competent authorities of host countries. In case the law of a host country does not prescribe investment licensing or approval, an investor shall produce a paper proving his/her/its right to carry out investment activities in the host country.

3. Having offshore investment projects and plans which are evaluated as feasible by credit institutions; and being capable of repaying debts to credit institutions.

4. Having no bad debts for 2 consecutive years by the time of loan request.

Article 6.Dossiers of loan request

When wishing to borrow loans, clients shall send documents proving their satisfaction of conditions for getting loans specified in Article 5 of this Circular and other documents to credit institutions as instructed by the latter.

Article 7. Loan limits

1. Loan limits shall be agreed by credit institutions and clients on the basis of loan demands, offshore investment plans, financial capacity of clients, credit limits for clients, and capital sources of credit institutions.

2. The loan limit applied by a credit institution must not exceed 70% of a client’s offshore investment capital amount.

Article 8. Lending terms

The lending term shall be agreed by a credit institution and a client according to the client’s solvency, the credit institution’ s ability to provide medium- or long-term capital, investment duration of the project, and the remaining validity period of the investment license, offshore investment registration certificate or another paper of equivalent validity.

Article 9. Currency used in loan provision and debt repayment

1. Credit institutions and clients shall agree on currency used in loan provision in accordance with the regulations on provision of loans by credit institutions to clients and relevant laws.

2. Currency used in debt repayment is the currency of the loan. In case of debt repayment in another currency, the agreement between the credit institution and the client shall be made in accordance with relevant laws.

Article 10. Loan security

1. The application of loan security measures must comply with regulations on the provision of loans by credit institutions to clients and relevant laws.

2. The application of measures to secure loans with overseas assets shall be agreed upon by the parties in conformity with the principle of selection and application of law in civil relations involving foreign elements as prescribed in Part Five of the Civil Code.

Article 11.Inspection and supervision of use of loans

1. Credit institutions have the rights and obligations to inspect and supervise the use of loans and repayment of debts by clients in accordance with law.

2. Credit institutions may request their clients to report on the results of operations and use of loans or to provide documents on the use of loans.

3. Clients shall use loans and repay debts in accordance with loan agreements; report and provide documents on the use of loans at the request of credit institutions.

Article 12.Responsibilities of units of the State Bank

1. The Credit Department of Economic Sectors shall:

a/ Act as the focal point in monitoring and summarizing the provision of loans by credit institutions to their clients for offshore investment;

b/ Assume the prime responsibility for, and coordinate in, handling problems related to the provision of loans for offshore investment within the scope of regulation of this Circular.

2. The Banking Supervision Agency shall:

a/ Assume the prime responsibility for, and coordinate with related units in, inspecting, examining and supervising credit institutions in providing loans to their clients for offshore investment in accordance with the regulations on provision of loans for offshore investment; and handle violations according to its competence in accordance with law;

b/ Control credit institutions in complying with regulations on money laundering prevention and combat related to the provision of loans for offshore investment.

3. The Foreign Exchange Management Department shall assume the prime responsibility for, and coordinate with related units of the State Bank in, handling problems concerning transfer of loans and other amounts related to the provision of loans for offshore investment.

4. The Monetary Policy Department shall assume the prime responsibility for, and coordinate with related units of the State Bank in, handling problems related to the provision of foreign currency loans for offshore investment.

5. Other units of the State Bank shall, according to their functions and tasks and scope of management, coordinate with one another in handling problems related to the provision of loans by credit institutions to their clients for offshore investment.

Article 13.Effect

1. This Circular takes effect on February 15, 2019, and replaces the State Bank’s Circular No. 10/2006/TT-NHNN of December 21, 2006, guiding the provision of loans by credit institutions to their clients for offshore investment.

2. Credit institutions and clients shall continue to perform the signed credit contracts/agreements in accordance with regulations effective at the time of signing such credit contracts or agreements revising such contracts in accordance with this Circular.

Article 14.Organization of implementation

The Chief of the Office, the Director of the Credit Department of Economic Sectors, and heads of related units of the State Bank, directors of the State Banks’s provincial-level branches, chairpersons of the Boards of Directors or Members’ Councils, and directors general (directors) of credit institutions shall organize the implementation of this Circular.-

For the State Bank Governor
Deputy Governor
DAO MINH TU