Circular No. 45/2011/TT-NHNN dated December 30, 2011 of the State Bank of Vietnam stipulating foreign exchange management for foreign loan provision and debt collection of credit institutions

THE STATE BANK OF VIETNAM

Circular No. 45/2011/TT-NHNN of December 30, 2011, stipulating foreign exchange management for foreign loan provision and debt collection of credit institutions

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. 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;

The State Bank of Vietnam (below referred to as the State Bank) stipulates foreign exchange management for foreign loan provision and debt collection of credit institutions as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Circular stipulates foreign exchange management for foreign loan provision and debt collection of credit institutions.

2. This Circular applies to organizations and individuals involved in foreign loan provision and debt collection of credit institutions.

Article 2. Interpretation of terms

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

1. Offshore lending means that a credit institution transfers or commits to transfer a sum of money to a non-resident customer (below referred to as foreign borrower) for a certain purpose in a certain period of time as agreed on the principle of repayment of both principal and interest.

2. Lending agreement means a written agreement between a credit institution and a foreign borrower which is effective for the disbursement of capital and debt collection, stipulating the terms and conditions for an offshore loan regarding loan use purpose, lending method, amount of the loan, interest rate, loan term, loan maturity, contents on loan security, method of debt repayment, and other relevant commitments.

3. Change agreement means a written agreement between a credit institution and a foreign borrower on the modification of the signed lending agreement. A change agreement may be in the form of a new agreement or an annex to the signed lending agreement.

4. Loan registration or loan change registration means that a credit institution registers with the State Bank an offshore loan or changes of an offshore loan under this Circular.

5. Registration certification is a State Bank’s certificate indicating that a credit institution has registered an offshore loan under this Circular.

6. Change registration certification is a State Bank’s certificate indicating that a credit institution has registered changes of an offshore loan when modifying the contents already certified by the State Bank in the registration certificate.

7. Foreign loan provision and debt collection account is a foreign currency account used for transferring an offshore loan.

Article 3. Responsibilities of credit institutions

1. To verify the legal and financial capacity of foreign borrowers and their ability to implement lending agreements in order to ensure collection of both principal and interest under lending agreements.

2. To bear all legal and financial risks in signing and implementing lending agreements.

3. To comply with current regulations on foreign exchange management, foreign loan provision and debt collection, credit institutions’ provision of loans for their clients, and security of offshore loans, and other relevant regulations of Vietnamese and foreign laws, in signing and implementing lending agreements.

4. To develop credit appraisal, credit risk administration and prevention processes for foreign loan provision and debt collection operations under relevant current regulations.

Article 4. Offshore loan syndication

1. When providing syndicated loans offshore, credit institutions shall comply with this Circular and other relevant regulations.

2. When 1 (one) credit institution joins other non-resident lenders to provide a syndicated loan offshore, it shall comply with the regulations on loan registration or loan change registration with the State Bank, opening and use of foreign loan provision and debt collection accounts, and report on its participation in providing syndicated loans offshore under this Circular.

3. When 2 (two) or more credit institutions jointly provide a syndicated loan offshore, they shall authorize one of them to act as the focal point. The focal-point credit institution shall represent the lending credit institutions in complying with the regulations on loan registration or loan change registration with the State Bank, opening and using foreign loan provision and debt collection accounts, and reporting under this Circular.

Article 5. Currency of offshore loans

1. Credit institutions shall provide offshore loans and collect offshore debts in foreign currency.

2. Credit institutions may provide offshore loans and collect offshore debts in Vietnam dong only after obtaining the State Bank’s written approval.

Article 6. Guarantee of offshore loans

When an offshore loan is guaranteed by a guarantee organization in Vietnam, the guarantee obligation performance must comply with relevant regulations.

Chapter II

SPECIFIC PROVISIONS

Article 7. Offshore lending conditions

To provide offshore loans, a credit institution must satisfy the following conditions:

1. Being licensed by the State Bank to trade in and provide foreign exchange services on the international market, including providing loans on the international market.

2. Complying with the State Bank’s current regulations on credit growth rate and prudential ratios in credit institutions’ operations.

3. Applying a process of approving offshore lending on the principle of ensuring independence and clearly defining individual responsibilities, responsibilities in the appraisal and decision on offshore lending.

4. Classifying debts and setting up credit risk provisions for offshore loans under the State Bank’s current regulations on classification of debts, setting up and use of provisions for handling credit risks in credit institutions’ banking operations.

5. Appraising lending projects, assessing the country risks and ability to fully and timely collect principals and interests of offshore loans.

6. Planning to raise capital and provide loans in foreign currency on the principle of rationality in the currency and term structure between raising and lending activities, avoiding maturity and liquidity risks that may arise in providing offshore loans.

7. Providing offshore loans only for production and business projects and plans within the scope of lawful operations of foreign borrowers.

8. Ensuring that contents of lending agreements and agreements related to offshore loans do not run counter to current Vietnamese laws.

Article 8. Foreign borrowers

1. Credit institutions may provide loans only to foreign borrowers that are enterprises established and operating overseas to which Vietnamese enterprises contributes capital in the form of offshore direct investment.

2. Provision of loans in other cases is subject to written approval of the State Bank.

Article 9. Loan or loan change registration

1. When satisfying offshore lending conditions specified in Circular, credit institutions shall sign lending agreements or change agreements with foreign borrowers and other related parties.

2. Credit institutions shall register loans or loan changes with the State Bank within 30 (thirty) days after signing lending agreements or change agreements (in case loans are not guaranteed) or after guarantee organizations sign a guarantee document or a document approving modifications to lending agreements (in case loans are guaranteed).

3. All transactions related to offshore loans may be conducted only after the State Bank certifies credit institutions’ loan registrations or loan change registrations under this Circular.

4. Credit institutions are not required to register with the State Bank lending agreements which are not effective for capital withdrawal such as framework credit agreements, memoranda of understanding and other similar agreements, provided that contents of such agreements do not run counter to Vietnamese laws.

Article 10. Loan registration dossiers

A credit institution shall send directly or by post 1 (one) loan registration dossier to the State Bank (the Foreign Exchange Management Department). A dossier comprises:

1. An offshore loan registration application (made according to the form provided in Appendix 01 to this Circular, not printed herein).

2. The credit institution’s report on credit growth situation, proving its satisfaction of prudential ratios in its operations at the end of the latest month prior to the signing date of the lending agreement and assessing the offshore loan’s impacts on the observance of regulations on credit growth rate and prudential ratios in credit institutions’ operations.

3. An appraisal report on the offshore loan, containing the following major details: assessment of the feasibility and effectiveness of the foreign borrower’s investment project or production and business plan; related risks, ability to fully and timely collect loan principals and interests; compatibility between the loan value and the size of the loan-funded project; loan security and other relevant contents.

4. The credit institution’s report and commitment on its satisfaction of offshore lending conditions specified in Clauses 3 and 4, Article 7 of this Circular, containing the following major details: regulations on the credit process applicable to the credit institution’s offshore lending; current professional qualifications of credit officers, risk administration and prevention capacity; classification of debts and setting up of provisions for the offshore loan; commitment to complying with the State Bank’s current regulations on classification of debts, setting up and use of provisions for dealing with credit risks for offshore loans.

5. A report on the sources of foreign-currency loans, containing details related to the size of loans, currency and term structure between raised capital and loans in foreign currency at the time of signing a lending agreement.

6. A copy and certified Vietnamese translation of the foreign borrower’s establishment decision or investment registration certificate under the host country’s regulations.

7. A certified copy of the offshore investment certificate of the Vietnamese enterprise contributing capital to the foreign borrower.

8. A copy and Vietnamese translation (certified by the credit institution’s competent representative) of the signed lending agreement.

9. Copies and Vietnamese translations (certified by the credit institution’s competent representative) of documents and agreements on guarantee for and security of the offshore loan.

Article 11. Loan change registration dossier

A credit institution shall send directly or by post 1 (one) loan change registration dossier to the State Bank (the Foreign Exchange Management Department). A dossier comprises:

1. An offshore loan change registration application (made according to the form provided in Appendix 02 to this Circular, not printed herein).

2. A copy and its Vietnamese translation (certified by the credit institution’s competent representative) of the signed change agreement. If related parties’ changed details have been agreed in the lending agreement or approved under law without requiring an officially signed document of the parties, the credit institution shall insert a document to clearly explain such details in the dossier.

3. The credit institution’s report proving its compliance with regulations on credit growth rate and prudential ratios in credit institutions’ operations at the end of the latest month  prior to the signing date of the offshore loan change agreement (in case the change is increase in turnover or extension of the duration of the offshore loan).

4. A copy and Vietnamese translation (certified by the credit institution’s competent representative) of the guarantee organization’s written approval of the change agreement (in case the offshore loan is guaranteed).

Article 12. Bases for considering registration or change registration certification

The State Bank shall consider certifying registration or change registration of offshore loan by a credit institution based on:

1. The State’s foreign exchange management policy in each period.

2. Completeness and validity of the loan registration or loan change registration dossier.

3. The credit institution’s compliance with this Circular’s provisions on offshore lending, regulations on loan provision by credit institutions for their customers, and other relevant regulations.

4. Concerned agencies’ opinions on the credit institution’s offshore loan, when necessary.

Article 13. Time for processing loan registration or loan change registration dossiers

1. The State Bank shall process loan registration or loan modification registration dossiers of credit institutions within 30 (thirty) days after receiving complete and valid dossiers. In case of refusal, the State Bank shall clearly state the reason in writing.

2. When necessary to acquire more information and conditions to have sufficient grounds for certifying or refusing to certify the registration or change registration, the State Bank shall notify such in writing to credit institutions within 10 working days after receiving their dossiers.

Article 14. Foreign loan provision and debt collection accounts

1. A credit institution shall provide an offshore loan via 1 (one) foreign loan provision and debt collection account opened at the credit institution or another credit institution. The credit institution shall conduct all transactions for offshore loan disbursement and foreign debt collection (loan principal and interest, charges, etc.) via this account.

2. When a foreign loan provision and debt collection account is opened at the credit institution for transferring an offshore loan, the credit institution shall separately monitor the offshore loan-related transactions in the foreign loan provision and debt collection account; and take responsibility for and conduct the offshore loan-related transactions in line with the contents of the State Bank’s registration or change registration certification.

3. When a foreign loan provision and debt collection account is opened at another credit institution for transferring an offshore loan, the credit institution at which the account is opened shall check and compare the documents produced by the borrower in order to properly conduct transactions related to the offshore loan in line with the contents of the State Bank’s registration or change registration certification and under current regulations.

4. Credit institutions shall use their foreign currency accounts opened overseas for foreign loan provision and debt collection according to current regulations on opening and use of overseas foreign currency accounts of credit institutions.

Article 15. Reporting regulations

1. Monthly (no later than the 10th of the subsequent month) and annually (no later than January 31 of the subsequent year), credit institutions shall report on provision of offshore loans (according to the forms provided in Appendices 03 and 04 to this Circular, not printed herein).

2. For unexpected cases, credit institutions shall make reports thereon at the request of the State Bank.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 16. Task assignment and coordination mechanism

1. The Foreign Exchange Management Department shall:

a/ Assume the prime responsibility for, and coordinate with the State Bank’s related units in, handling common issues related to credit institutions’ offshore lending under current regulations.

b/ Summarize opinions of the State Bank’s Banking Inspection and Supervision Agency and other units and other relevant agencies (when necessary), report to the State Bank Governor to decide on the certification of, or refuse to certify the registration or change registration under this Circular.

c/ Biannually collect data and report to the State Bank Governor on foreign loan provision and foreign debt collection by credit institutions.

2. The Banking Inspection and Supervision Agency shall:

a/ Within 10 working days after receiving the Foreign Exchange Management Department’s request for opinions on an offshore loan, send to the Foreign Exchange Management Department a document on details related to the credit institution’s offshore loan. Such document contains certification of the credit institution’s scope of providing foreign exchange services; certification of the credit institution’s compliance with the State Bank’s current regulations on prudential ratios in credit institutions’ operations and regulations on the credit institution’s ratio of short-term raised capital used for offer of medium- and long-term loans at the end of a month before the signing date of the lending agreement or change agreement in case such change results in an increase of turnover or the extension of duration of the offshore loan.

b/ Assume the prime responsibility for, and coordinate with related units in, inspecting, examining and supervising credit institutions in foreign loan provision and debt collection.

3. Other units under the State Bank shall, within the ambit of their functions, tasks and management, coordinate with one another and give opinions on loan registration or loan change registration dossiers of credit institutions when necessary.

Article 17. Implementation provisions

1. This Circular takes effect on February 13, 2012.

2. Credit institutions’ offshore loans already provided before the effective date of this Circular may continue to be performed under the State Bank’s registration or change registration certification documents (if any). If change agreements are made after the effective date of this Circular, credit institutions shall comply with this Circular.

Article 18. Organization of implementation

The Chief of the Office, the director of the Foreign Exchange Management Department, the Chief of the Banking Inspection and Supervision Agency and heads of units under the State Bank, directors of provincial-level State Bank branches, and chairpersons of boards of directors and directors general (directors) of credit institutions shall implement this Circular.-

For the State Bank Governor
Deputy Governor
LE MINH HUNG