Decision No. 286/2002/QD-NHNN dated April 3, 2002 of the State Bank of Vietnam issuing the Regulation on co-financing by credit institutions

DECISION

ISSUING THE REGULATION ON CO-FINANCING BY CREDIT INSTITUTIONS

THE STATE BANK GOVERNOR

Pursuant to the Law on the State Bank of Vietnam and the Law on Credit Institutions of December 12, 1997;

Pursuant to the Government’s Decree No. 15/CP of March 2, 1993 on the tasks, powers and State management responsibilities of the ministries and ministerial-level agencies;

At the proposal of the director of the Credit Department,

DECIDES:

Article 1.-To issue together with this Decision the Regulation on co-financing by credit institutions.

Article 2.-This Decision takes effect 15 days after its signing and replaces the State Bank Governor’s Decision No. 154/1998/QD-NHNN14 of April 29, 1998 issuing the Regulation on co-financing by credit institutions.

Article 3.-The director of the Office, the director of the Credit Department, the heads of the units under the State Bank, the directors of the State Bank’s branches in the provinces and centrally-run cities, the chairmen of the Managing Boards and the general directors (directors) of credit institutions shall have to implement this Decision.

REGULATION

ON CO-FINANCING BY CREDIT INSTITUTIONS
(Issued together with Decision No. 286/2002/QD-NHNN of April 3, 2002 of the State Bank Governor)

I. GENERAL PROVISIONS

Article 1.-Scope of regulation

This Regulation governs the co-financing by credit institutions for part or the whole of a production, business, service, development investment or livelihood project or plan (hereinafter referred to as a project for short) in order to raise the capacity and efficiency of production and business activities of the financed parties and credit institutions.

Article 2.-Interpretation of terms

In this Regulation, the following terms are construed as follows:

1. Co-financing is the process of organizing the granting of credit by the co-financing parties with the participation of two or more credit institutions, with one of them acting as the coordinator, for part or the whole of a production, business, service, development investment or livelihood project or plan.

2. Co-financing parties are two or more credit institutions jointly committing to and coordinating with one another in co-financing the financed parties according to the provisions of this Regulation.

3. Members are credit institutions or their branches authorized by the credit institutions’general directors (directors) to accept to participate in granting credit in specific forms to co-finance a project.

4. Co-financing coordinating organization is one of the member credit institutions, which is unanimously selected by the other members on the basis of its capacity and assigned to coordinate the organization of the co-financing. The central people’s credit fund and financial companies of corporations shall not be allowed to act as the co-financing coordinating organization.

5. Credit-granting coordinating member must be a member capable of performing related specific operations of the credit-granting form assigned to it for coordination, including:

5.1. Syndicated loan-provision coordinating member: being a member unanimously selected by the members participating in the syndicated loan provision and assigned to coordinate the organization of the syndicated loan provision.

5.2. Co-guaranty coordinating member: being a member unanimously selected by the members participating in the guaranty and assigned to coordinate the organization of co-guaranty.

6. Payment coordinating organization must be a credit institution licensed to provide payment services and is unanimously selected by the other participating members and assigned to provide payment services in the co-financing.

7. Financed parties are legal persons, private enterprises, cooperation groups, households, partnerships or individuals that need credit and are granted credit by the co-financing parties according to the provisions of this Regulation for carrying out projects.

8. Co-financing contract is a written joint commitment of the co-financing members to the exercise of their respective rights and the fulfillment of their respective obligations throughout the co-financing process.

9. Credit-granting contract for co-financing is a written commitment between the co-financing parties (group of members or individual members) and the co-financed parties in exercising the rights and fulfilling the obligations of each party and each member in lending or guaranty relations for carrying out co-financed projects. Credit-granting contracts for co-financing include lending contracts, syndicated loan-providing contracts, guaranty contracts, and co-guaranty contracts.

Article 3.-Cases of application of co-financing

1. The financed party’s need for credit for a project exceeds the currently prescribed lending or guaranty limit of credit institutions;

2. The financial capability and capital source of a single credit institution fails to meet the project’s need for credit;

3. Credit institutions need to distribute risks;

4. The financed party needs to mobilize capital from different credit institutions.

Article 4.-Organizations eligible for participating in co-financing

Organizations eligible for participating in co-financing are credit institutions established and operating under the Law on Credit Institutions and their authorized branches. Grassroots people’s credit funds shall not be allowed to participate in co-financing.

Article 5.-Credit-granting forms for co-financing

1. Lending, syndicated loan provision;

2. Guaranty, co-guaranty;

3. Combination of the above forms.

The use of other credit-granting forms in co-financing shall be prescribed by the State Bank Governor.

Article 6.-Currency used in co-financing

The currency used in co-financing is Vietnam dong or a foreign currency suitable for the project’s need and compliant with the relevant regulations on credit granting and foreign exchange management.

Article 7.-Principles for organization of co-financing

1. The members volunteer to participate and coordinate with one another in co-financing.

2. The members unanimously select a credit-granting coordinating organization and member, and a payment-coordinating member for co-financing.

3. The credit-granting form and transaction mode between the co-financing parties and financed parties must be agreed upon by the members and inscribed in the co-financing contract.

Article 8.-Co-financing principles

The concerned co-financing parties must, apart from complying with the co-financing regulations, observe the following:

1. The credit granting in each specific form and the application of security measures in the co-financing process must comply with the State Bank Governor’s regulations and other relevant law provisions.

2. Co-financing members must reach unanimous agreement on the project evaluation method and may decide to or not to set up an evaluation council (composed of members from the co-financing credit institutions), if not, must secure the consent among the members on the project’s feasibility, create conditions for granting credit in a convenient and lawful manner.

3. The rights and obligations of the co-financing parties and the financed parties shall be exercised and fulfilled corresponding to each credit-granting form according to the regulations of the State Bank Governor.

4. The co-financing parties must regularly inspect and supervise the use of financing sources for the project as agreed upon in the co-financing contract and the credit-granting contract and coordinate with the financed party in dealing with any arising matters.

Article 9.-Interests and charges in co-financing

1. The co-financing members shall collect interests and assorted charges according to the provisions of law.

2. Expenses incurred in the co-financing process shall be agreed upon by the co-financing members, inscribed in the co-financing contracts, and covered by the interests and assorted charges collected from the customers.

II. SPECIFIC PROVISIONS

Article 10.-Proposals on co-financing a project

1. After receiving dossiers of application for credit as prescribed for each credit-granting form from the customers, credit institutions shall preliminarily evaluate the dossiers, assessing the feasibility of the projects seeking for loans.

2. Immediately after preliminarily evaluating the dossiers, if finding that the projects are feasible and need co-financing, the credit institutions which have received the dossiers shall project those credit institutions for participation in co-financing and send them the letters of invitation for co-financing enclosed with the preliminary evaluation results. If projects are infeasible, the credit institutions shall issue written replies to the customers, clearly stating the reasons for refusal to grant credit.

3. Letters of invitation for co-financing must include the project’s principal details (the project title, investor’s name, total investment capital, the need of co-financing for project execution, lending and repayment time, guaranty duration, estimated interest rate, charges, and the project’s debt repayment plan) and basic information on the proposal for participation in co-financing, the mode of participation in co-financing, co-financing duration, interest rate, assorted charges related to the project’s co-financing.

Article 11.-Co-financing coordination

1. Credit institutions invited to participate in co-financing shall base themselves on the co-financing proposals of the inviting credit institutions and enclosed documents, the capacity of their capital sources and current law provisions to decide whether or not to participate in co-financing and must respond to such proposals in writing.

2. If the co-financing proposal is accepted and fully meets the credit need of the financed parties, the co-financing inviting credit institutions shall reply to the financed parties on the acceptance of co-financing. The concerned parties shall have to reach agreement upon and carry out the co-financing contents.

3. Where the co-financing proposal is accepted but not enough for the credit need of the financed parties, the co-financing inviting credit institutions shall:

a/ Re-consider the possibility to grant credit to the co-financed parties in accordance with the law provisions and their capabilities in terms of finance, capital source and assets.

b/ If the credit institution which has received the dossier is unable to grant credit unilaterally, it shall notify the financed party of its inability to lend or guarantee, even in the co-financing form and clearly state the reasons therefor.

4. After their applications for co-financing have been agreed upon by the concerned parties, the financed parties shall not be allowed to request co-financing from other credit institutions unless they obtain the consent thereof from the institutions which have received their dossiers.

5. The invitation for co-financing may be effected in other forms but the members approval must be made and sent in writing.

Article 12.-Evaluation of co-financed projects

1. The co-financing parties shall together select and agree on the mode of evaluating the projects; the original evaluation dossiers must be filed at the co-financing coordinating organizations and the evaluation results must be sent to the members and filed at the co-financing coordinating organizations.

2. The evaluation results must include all substantial information on the project, the co-financed party’s financial capability and its ability to fulfill obligations toward the co-financing parties.

Article 13.-Co-financing contracts

1. A co-financing contract should contain the following principal particulars:

1.1. Co-financing members.

1.2. The co-financing coordinating organization.

1.3. The credit-granting coordinating member.

1.4. The financed parties, the capital source structure and plan for the project execution.

1.5. The project evaluation mode and results.

1.6. The credit-granting form.

1.7. Co-financing content:

a/ The total co-financing amount divided by each credit-granting form and by each co-financing member.

b/ Concrete agreements on co-financing charge.

c/ The principal details of each credit-granting form as prescribed by law, specifically:

- Lending, provision of syndicated loans: Syndicated loan-provision coordinating member, participating credit institutions, type and mode of lending, loan amount and term, interest rate, loan security measures, capital (both principal and interest) recovery mode and other details according to the State Bank Governor’s regulations on lending.

- Guaranty and co-guaranty: Co-guaranty coordinating member, participating credit institutions, type of guaranty, the value of the guaranty obligation, the guaranty duration, guaranty charge, and other details according to the State Bank Governor’s regulations on guaranty.

1.8. Payment security (if any): Payment coordinator, financing mode, debt collection, payment of charges and interests by the financed parties and among the co-financing participating members.

1.9. Regulations on the exchange of information among the co-financing participating members on the co-financing progress and the financed party’s project execution.

1.10. Credit-granting security: The security form, the method of valuing the assets as loan security, credit-granting security contract, handling of security assets for debt recovery and other related matters.

1.11. Handling of risks and disputes among members, principles for handling problems arising in the co-financing process.

1.12. Dossier archival.

1.13. Other details as agreed upon among the co-financing parties.

1.14. Rights, obligations and responsibilities of each member in the signing and performance of the co-financing and credit-granting contracts with the financed parties.

2. The specific provisions of the co-financing contracts must comply with the law provisions on economic contracts, the provisions of this Regulation, and other relevant law provisions.

3. A co-financing contract must be made in multiple copies of equal validity, sufficiently for each member to keep one.

Article 14.-Credit-granting contracts

1. A credit-granting contract shall include contents related to the specific provisions on each credit-granting form and the provisions on the rights and obligations of each party in each credit-granting relation, and the relevant necessary provisions as agreed upon in the co-financing contract. The credit-granting contract must be certified by the co-financing coordinating organization if such organization does not participate in granting credit under this contract.

2. A credit-granting contract may be signed between the co-financing parties and the financed party through the credit-granting coordinating member, or directly between the credit institutions and the financed party in accordance with the provisions of the co-financing contract.

Article 15.-Loan security, principal and interest recovery, debt rescheduling

Loan security, principal and interest recovery, and debt rescheduling shall comply with the State Bank Governor’s current regulations on lending, guaranty and agreement of the co-financing parties in the co-financing contract and the credit-granting contract.

Article 16.-Responsibilities of the co-financing parties

1. The co-financing parties shall have to adhere to the current regulations on each credit-granting form as committed in the co-financing and credit-granting contracts.

2. The financed parties shall have to report fully on their financial situation and activities to the co-financing parties (co-financing coordinating organization, credit-granting coordinating member and concerned parties) for the latter to supervise and inspect when co-financing.

3. The co-financing coordinating organizations shall draft the co-financing contracts and reach agreement with the members thereon; to discuss on behalf of the co-financing parties with the financed parties and have the responsibility to urge other members to handle arising questions.

4. The syndicated loan-provision coordinating members shall draft the syndicated loan-provision contracts, reach agreement with the syndicated loan-provision members, sign on behalf of these members the syndicated loan-provision contracts with the financed parties according to the State Bank Governor’s regulations on lending and have the responsibility to urge and supervise the other members and the financed parties in the syndicated loan provision and concurrently inform promptly and fully the results of the inspection of the use of capital, and other information to the co-financing coordinating organizations and the concerned parties so as to discuss and agree on handling measures to be taken when necessary.

5. The co-guaranty coordinating members shall abide by the State Bank Governor’s regulations on guaranty.

6. The payment coordinating organizations shall carry out the payment operations arising in the process of performing the co-financing contracts in conformity with the payment agreements in the co-financing and credit-granting contracts.

7. The co-financing members shall exchange information on the performance of the co-financing contracts as agreed upon therein.

Article 17.-Inspection, handling of risks and disputes

1. The co-financing parties must regularly oversee the co-financing process, inspect the financed parties in the process of managing and using capital according to the provisions of the contracts signed by the concerned parties and current law provisions.

2. Where risks occur in the co-financing process, the co-financing parties shall reach agreement among themselves and with the financed parties on how to handle them according to the co-financing contracts and current law provisions.

3. All disputes over breaches of the co-financing or credit-granting contracts shall be solved by the concerned parties through negotiation and agreement. Where they cannot be settled, the concerned parties shall be entitled to initiate lawsuits according to the provisions of law.

III. IMPLEMENTATION PROVISIONS

Article 18.-Implementation organization

1. Based on to this Regulation, credit institutions shall issue documents concretely guiding professional operations suited to their respective conditions, characteristics and operation charters.

2. The heads of the units under the State Bank of Vietnam and the directors of the State Bank’s branches in the provinces and centrally-run cities shall base themselves on their assigned functions and tasks to direct and oversee the implementation of this Regulation.

3. The director of the Accounting and Finance Department shall have to guide the cost-accounting of transferred capital amounts and granted credits as well as other particular professional operations arising when credit institutions provide co-financing under this Regulation.

Article 19.-Amendment and supplementation

Any amendment and supplementation of this Regulation shall be decided by the State Bank Governor.