Circular 20/2024/TT-NHNN factoring and other services related to factoring of credit institutions, foreign bank branches

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Circular No. 20/2024/TT-NHNN dated June 28, 2024 of the State Bank of Vietnam prescribing factoring and other services related to factoring of credit institutions, foreign bank branches
Issuing body: State Bank of VietnamEffective date:
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Official number:20/2024/TT-NHNNSigner:Dao Minh Tu
Type:CircularExpiry date:Updating
Issuing date:28/06/2024Effect status:
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Fields:Finance - Banking
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LuatVietnam.vn is the SOLE distributor of English translations of Official Gazette published by the Vietnam News Agency
Effect status: Known

THE STATE BANK OF VIETNAM

_________________

No. 20/2024/TT-NHNN

THE SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

_______________

Hanoi, June 28, 2024

CIRCULAR

Prescribing factoring and other services related to factoring of credit institutions, foreign bank branches

_________________

 

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

Pursuant to the January 18, 2024 Law on Credit Institutions;

Pursuant to the Government’s Decree No. 102/2022/ND-CP of December 12, 2022, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of Director General of the Department of Credit for Economic Sectors and Director General of the Department of Foreign Exchange Management;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing factoring and other services related to factoring of credit institutions, foreign bank branches.

 

Chapter I

GENERAL PROVISIONS

 

Article 1. Scope of regulation

This Circular prescribes factoring and other services related to factoring of credit institutions and foreign bank branches to clients.

Article 2. Subjects of application

1. Commercial banks, general finance companies, factoring finance companies, and foreign bank branches.

2. Organizations and individuals including both residents and non-residents, involved in factoring and other services related to factoring.

Article 3. Definitions of terms

In this Circular, the following terms are defined as follows:

1. Factor means a commercial bank, general finance company, factoring finance company, and foreign bank branch authorized to perform factoring activities and other services related to factoring. In the case of syndicated factoring, the factor also includes foreign credit institutions (established abroad according to foreign law).

2. Unit providing other services related to factoring means a commercial bank, general finance company, factoring finance company, and foreign bank branch.

3. Clients of the factor include non-resident organizations and resident organizations or individuals as prescribed by the foreign exchange management laws (hereinafter referred to as clients):

 a) Clients are the sellers in the case of factoring for sellers with refund commitment from sellers.

 b) Clients are the purchasers in the case of factoring for sellers without refund commitment from sellers.

 c) Clients are the purchasers in the case of factoring for purchasers.

4. Other services related to factoring mean services including management of receivables and debt recovery for receivables in accordance with Vietnamese law and commercial practices regarding factoring.

5. Receivable means a money amount the seller is entitled to receive from the purchaser under the goods purchase and sale or service provision contract.

6. Factoring amount means the amount of money that the factor disburses to the seller to purchase the seller's receivable or advance payment on behalf of the purchaser but must not exceed the value of the receivable.

7. Seller (including exporter) means the party selling goods or providing services and having lawful interests with regard to receivables as agreed upon in the goods purchase and sale or service provision contract.

8. Purchaser (including importer) means the party purchasing goods or using services and having payables as agreed upon in the goods purchase and sale or service provision contract.

9. Factoring for a seller with refund commitment means a form of credit extension in case that the factor purchases the seller's receivables. The seller is obligated to refund the factoring amount if the purchaser fails to pay or makes incomplete payments to the factor.

10. Factoring for a seller without refund commitment means a form of credit extension in case that the factor purchases the seller's receivables. The factor exercises the right to collect the debt from the purchaser. The seller is not obligated to refund the factoring amount if the purchaser fails to pay or makes incomplete payments to the factor.

11. Factoring for a purchaser means a form of credit extension in case that the factor makes an advance payment to the seller on behalf of the purchaser by purchasing the receivable. The purchaser is obligated to refund the advance payment thereon to the factor as agreed upon.

12. Goods purchase and sale or service provision contract means a written agreement between the seller and the purchaser on the purchase and sale of goods or provision of services in accordance with the law regulations (except for the provisions in Clause 4, Article 7 of this Circular).

13. Factoring contract means a written agreement between the factor and client aiming to establish, change or terminate rights and obligations of contractual parties.

14. Contract for providing other services related to factoring means an agreement between the unit providing other services related to factoring, the factor, and other related parties (if any) to establish, modify, or terminate the rights and obligations of the parties.

15. Goods purchase and sale or service provision document means a document relating to the payment request made by the seller to the purchaser or document on the delivery of goods or provision of services on the basis of the goods purchase and sale or service provision contract.

16. Domestic factoring means factoring based on a goods purchase and sale or service provision contract under which the seller and purchaser are residents.

17. International factoring means factoring based on a goods purchase and sale or service provision contract between the exporter and importer under which either of them is a resident and the other is a non-resident.

18. Factoring debt means a money amount which has been advanced by the factor for the client but not yet refunded.

19. Refund of factoring debt means the refund of the factoring amount and factoring interest rate by the seller or the purchaser to the factor according to the agreement.

20. Factoring time limit means the remaining term of the receivable and the refund term of the factoring debt.

21. Refund term of factoring debt means the period calculated from the day following the end date of the payment term or the payment period of the receivable in the contract for goods purchase and sale or service provision until the end date of the factoring term, except when the related parties agree that the client may refund the debt before the end date of the payment term or period of the receivable.

22. Debt payment term means a term within the agreed factoring time limit at the end of which the seller or purchaser has to pay part or the whole of the factoring debt to the factor.

23. Overdue factoring debts include:

 a) Factoring debts converted into overdue debts under Clause 2, Article 17 of this Circular.

 b) Factoring debts which the client is unable to prematurely pay when the factor terminates factoring and collects premature debts under Clause 1, Article 19 of this Circular.

24. Capital use plan means a collection of information on the use of the factoring amount made by the client, which must state:

 a) The maximum value of the receivable, the maximum factoring amount, and the purpose of using the factoring amount.

 b) The client’s funding sources for debt payment.

25. Financial capacity means the capacity in terms of capital, asset and other lawful financial sources of a client.

 

Chapter II

FACTORING

 

Article 4. Principles for implementing factoring

1. Factors shall implement factoring based on compliance with the Law on Credit Institutions, relevant law regulations, and the License issued by the State Bank of Vietnam (hereinafter referred to as the State Bank).

2. Factors shall implement factoring in foreign currency within the scope of their business operations, providing foreign exchange services in the domestic market and the international market according to relevant law regulations.

3. Factors shall comply with regulations on cases that unfeasible credit extension, restrictions on credit extension, and credit limits as prescribed in the Law on Credit Institutions and regulations of the State Bank regarding limits and prudential ratios in the operations of credit institutions and foreign bank branches.

4. Syndicated factoring shall be implemented in accordance with the provisions of this Circular, regulations of the State Bank on syndicated credit extension to clients, current regulations on foreign lending and debt refund, and relevant law regulations. In cases that the syndicated factoring involves a foreign credit institution and the client is a resident, Vietnamese factors shall only participate when the client complies with the regulations on foreign exchange management regarding the foreign lending and debt refund of enterprises.

5. International factoring shall be implemented according to the provisions of this Circular. In cases that foreign lending and debt recovery arise in international factoring, the factor shall comply with the regulations on foreign exchange management regarding foreign lending and debt recovery.

6. Foreign bank branches are permitted to implement factoring for purchasers or sellers who are non-residents, provided they comply with the provisions specified at Points c, d, and dd of Clause 1 and Point b of Clause 2, Article 11 of this Circular.

Article 5. Use of language

1. A factoring contract shall be made in Vietnamese or in both Vietnamese and a foreign language. The factor shall agree with the client to use a foreign language in cases that the factoring involves foreign elements according to the provisions of the Civil Code.

2. For factoring contracts and other foreign-language documents used in factoring activities, the factor shall provide a Vietnamese translation (certified by the legal representative of the factor or notarized) if requested by a competent authority.

Article 6. Internal regulations

1. Pursuant to the Law on Credit Institutions, this Circular and relevant laws, credit institutions and foreign bank branches shall issue internal regulations on factoring activities (including provisions on electronic factoring, if any) suitable to the business characteristics of the credit institutions or foreign bank branches.

2. Within 10 days from the date of issuance or amendment, supplementation of the internal regulations, the factor shall send one copy of the internal regulations on factoring to the State Bank (Banking Supervision Agency or the State Bank branch in the province or citiy) in accordance with the law regulations.

Article 7. Cases ineligible for factoring

The factor may not provide factoring for receivables in one of the following cases:

1. Arise from goods purchase and sale or service provision contracts banned by law.

2. Arise from goods purchase and sale or service provision contracts with remaining terms of the receivable of 01 year or more counting from the date of receipt of a request for factoring.

3. Arise from goods purchase and sale or service provision contracts containing an agreement that contractual rights and obligations may not be transferred.

4. Arise from service provision contracts in the field of finance, banking or insurance under the Prime Minister’s regulations on the system of Vietnam’s economic sectors.

5. Have been factored or have been used to secure other debt obligations (unless the factoring amount shall not exceed the value of the receivable after deducting the portion that has already been factored and used to secure other debt obligations).

6. Have become overdue for payment under goods purchase and sale or service provision contracts.

7. Are involved in disputes in the performance of contracts for goods purchase and sale or service provision.

Article 8. Factoring methods

1. Single factoring: Upon each factoring, the factor and client shall carry out factoring procedures and sign a factoring contract.

2. Limit-based factoring: The factor shall determine, and reach agreement with the client on, a maximum factoring debt limit to be maintained in a certain period and on the use of this limit. At least once every year, the factor shall consider re-determining this limit and its maintenance period.

3. Syndicated factoring: Two or more factors jointly provide factoring for one or several receivable(s), with one of them acting as the focal point in organizing syndicated factoring.

Article 9. Currencies used in factoring and debt payment

1. Regarding factoring for a seller, the currency used in factoring is the currency of the receivable or Vietnam Dong.

2. Regarding factoring for a seller:

a) The currency used in factoring is Vietnam dong, except in the cases specified at Point b of this clause.

b) The factor may consider and decide to provide factoring in a foreign currency for foreign-currency receivables in accordance with regulations on foreign exchange management and when one of the following conditions are satisfied:

(i) The purchaser is a non-resident.

(ii) The purchaser is a resident with sufficient foreign currency from production and business revenue to refund the factoring debt.

(iii) The purchaser is a resident that is a key enterprise for importing petroleum, assigned an annual petroleum import quota by the Ministry of Industry and Trade to make overseas payments for petroleum imports.

3. The currency used for paying factoring debts and interests is that used in factoring. In cases that the refund of factoring debt or factoring charges is made in a different currency, it shall be carried out as agreed between the factor and the client in accordance with relevant law regulations.

In cases on the due date to refund the factoring debt in foreign currency, the client can prove that due to objective reasons that delay the payment of foreign currency from its/his/her production and business activities, or the client does not have or currently does not have enough sufficient foreign currency to refund the factoring debt, it/he/she is allowed to purchase foreign currency from credit institutions or foreign bank branches authorized to conduct foreign exchange business to refund the factoring debt.

If the client needs to purchase foreign currency from the factor, the factor shall sell the foreign currency to the client. If the client buys foreign currency from a different credit institution or foreign bank branch, that credit institution or foreign bank branch shall transfer the foreign currency to the factor. The client shall sell foreign currency to the credit institution or foreign bank branch that sold them the foreign currency in the case of having foreign currency earnings from its production and business activities when requested by that credit institution or foreign bank branch.

Article 10. Interest rates and charges of factoring

1. Interest rates and charges of factoring shall be agreed upon by the factor and the purchaser or seller in accordance with law regulations.

In the case of syndicated factoring, the parties involved in the syndicated factoring shall agree on the factoring charge for each syndicated party in accordance with law regulations.

2. Upon its maturity, if failing to pay or fully pay a factoring debt as agreed upon, the purchaser or seller shall pay interests as follows:

a) Pay an interest on the factoring amount, which is not paid upon its maturity, at the factoring interest rate already agreed upon for the factoring time limit;

b) If failing to pay on time the interest under Point a of this Clause, pay a late-payment interest at the rate agreed upon by the factor and the purchaser or seller which, however, must not exceed 10% per year on the late-payment interest balance for the late-payment period;

c) If the factoring amount is converted into an overdue debt, pay an interest on the overdue factoring amount for the late-payment period at the rate not exceeding 150% of the interest rate applied to the due factoring debt at the time of conversion.

3. If an adjusted factoring interest rate is applied, the factor and the purchaser or seller shall reach agreement on principles and factors for determination of the adjusted interest rate and time of adjustment. If the application of such factors leads to different factoring interest rates, the factor shall apply the lowest one.

Article 11. Factoring conditions for clients

The factor shall consider and decide to provide factoring when the client satisfies the following conditions:

1. Regarding factoring for a seller:

a) If the seller is a resident with a refund commitment:

(i) Having full civil legal capacity and civil act capacity as prescribed by law;

(ii) Having a lawful purpose for using the funds;

(iii) Financially viable for debt payment;

(iv) Having a feasible capital use plan;

b) If the seller is a resident without a refund commitment and the purchaser is a resident, the purchaser must satisfy the conditions specified at Point a, Clause 1 of this Article;

c) If the seller is a resident without a refund commitment and the purchaser is a non-resident, the purchaser must satisfy the conditions specified at Point a, Clause 1 of this Article and one of the following conditions:

(i) The purchaser being an enterprise established and operating overseas has a capital contribution from a Vietnamese enterprise in the form of investment as prescribed at Points a, c Clause 1 Article 52 of the Law on Investment or in other forms of investment as prescribed at Point dd Clause 1 Article 52 of the Law on Investment;

(ii) Part or all of the value of the receivables is guaranteed for payment by a third party that is a credit institution, foreign bank branch, foreign credit institution or insured by a third party, or secured by the client's and/or third party's funds at the factor. If the receivables are only partially guaranteed or insured, the maximum factoring amount shall be equal to the total value of the receivables that are guaranteed or insured;

d) If the seller is a non-resident with a refund commitment, the seller must satisfy the conditions specified at Point a, Clause 1 of this Article and one of the following conditions:

(i) The seller being an enterprise established and operating overseas has a capital contribution from a Vietnamese enterprise in the form of investment as prescribed at Points a, c Clause 1 Article 52 of the Law on Investment or in other forms of investment as prescribed at Point dd Clause 1 Article 52 of the Law on Investment;

(ii) Satisfying the conditions specified in item (ii) Point c Clause 1 of this Article;

dd) If the seller is a non-resident without a refund commitment, the purchaser that is a resident must satisfy the conditions specified at Point a, Clause 1 of this Article.

2. Regarding factoring for a purchaser:

a) The purchaser, who is a resident, satisfies the conditions specified at Point a, Clause 1 of this Article;

b) The purchaser, who is a non-resident, satisfies the conditions specified at Point c, Clause 1 of this Article.

Article 12. Dossier of request for factoring

1. When needing factoring, the client shall send to the factor a dossier of request for factoring, comprising:

a) Documents proving his/her/its satisfaction of factoring conditions specified in Article 11 of this Circular and other papers as required by the factor, at least including:

(i) The original contract, goods purchase and sale documents, provision of service documents; or a copy of the goods purchase and sale or service provision contract, a list of goods purchase and sale documents, service provision documents in case the factor and the client agree on measures to ensure the accuracy, truthfulness, and completeness of the copy or list compared to the original; or

(ii) Information and data about the goods purchase and sale, provision of services in the form of data messages in accordance with the law on electronic transactions and related laws;

b) Information about persons related to the client who is a resident as prescribed by the Law on Credit Institutions if the total credit balance of that client at the factor (including the factoring amount being requested for credit extension) is greater than or equal to 0.1% of the most recent equity capital of the factor which is a commercial bank, a foreign bank branch (if the factor is a general finance company or a factoring finance company, this ratio shall be 0.5%); In the case that the factor has negative equity capital, the above ratio is applied to charter capital or allocated capital (for foreign bank branches); information about persons related to the client who is a non-resident when the related person is being provided credit extension by the factor. Information about related persons includes:

(i) Information about related persons who are individuals, including: full name, personal identification number for Vietnamese citizens; nationality, passport number, visa number or documents equivalent to a visa or documents proving visa exemption; date of issue, place of issue for non-residents; relationship with the client;

(ii) Information about related persons who are organizations, including: name, enterprise identification number, address of the head office, business registration certificate number or equivalent legal document; information about the legal representative as specified in item (i) Point b Clause 1 of this Article, relationship with the client;

c) Other documents as guided by the factor.

2. The client shall take responsibility for providing sufficient information, documents, data in an accurate, truthful and timely manner, and updating when there are changes to the information, documents, and data specified in Clause 1 of this Article to the factor during the process of credit extension and take the responsibility for such provision of information, documents, and data.

Article 13. Security for factoring activities

1. The application of security measures or the non-application of security measures is agreed upon by the factor and the client. The agreement on security measures between the factor and the client must comply with the law on secured transactions and relevant law regulations.

2. The client and the guarantor must cooperate with the factor to handle the security measures when there are grounds for handling according to the factoring contract, the agreement on security measures, and relevant law regulations.

Article 14. Requirements for factors

1. For factoring the seller with a refund commitment from the seller, the factor must meet the following requirements:

 a) Agree with the seller on sending a written notice or data message equivalent to a written notice of factoring to the purchaser and other related parties with obligations (if any). The notice must at least include the content of transferring rights and obligations regarding the receivables between the seller and the factor and request the purchaser and other related parties with obligations (if any) to make payments to the factor;

 b) If the seller does not provide the notice as prescribed at Point a of this clause, the factor shall only provide factoring to the seller in cases that the factor and the seller agree on measures for the factor to control the payments from the purchaser or other related parties with obligations (if any) to the seller.

2. Regarding factoring for the seller without a refund commitment from the seller and factoring for the purchaser: The factor shall only proceed when the seller agrees in writing or in a data message equivalent to a written document about the transfer of rights and legal interests related to the receivables to the factor; and the purchaser makes a commitment to take the responsibility for full refund to the factor.

Article 15. Appraisal and decision on factoring

1. For factoring for the seller, the factor shall:

a) In case of having a refund commitment from the seller to the factor, the factor must appraise the seller's ability to meet the factoring conditions as prescribed at Points a, d Clause 1 Article 11 of this Circular;

b) In case of not having refund commitment from the seller to the factor, the factor must appraise the purchaser's ability to meet the factoring conditions as prescribed at Points b, c, dd Clause 1 Article 11 of this Circular.

2. For factoring for the purchaser, the factor must appraise the purchaser's ability to meet the factoring conditions as prescribed in Clause 2 Article 11 of this Circular.

3. The factor must organize the factoring approval based on the principle of separating responsibilities between the appraisal and decision-making stages of factoring. During the appraisal process, the factor shall use its internal credit rating system, combined with information from the Vietnam National Credit Information Center and other information channels.

Article 16. Factoring contracts

1. A factoring contract shall be made in writing in accordance with this Circular and other relevant law regulations. If a contract is made in the form of an electronic data message, it must comply with the law on electronic transactions, and must have at least the following:

a) Information about the parties in the factoring relationship;

b) The maximum value of the receivables, the maximum factoring amount, the factoring limit for limit-based factoring;

c) Use purpose of the factoring amount;

d) Currency used in factoring, currency used for the payment of factoring debt and charge;

dd) Factoring method;

e) Factoring time limit, refund term for factoring debt, and period of maintaining the factoring limit (for the factoring method based on the limit);

g) Factoring interest (including the interest rate applicable to overdue factoring amounts), factoring charges;

h) Refund of the factoring debt, the order of recovery of the factoring amount, unpaid interest of factoring, premature payment of the factoring debt;

i) Conversion of the factoring debt into an overdue debt;

k) Debt handling;

l) Responsibility to send a notice to the purchaser or other related parties with obligations (if any);

m) Rights and obligations of contractual parties, stating that the seller commits not to use the receivables to secure other debt obligations or for other credit extension purposes without the consent of the factor;

n) Dispute settlement;

o) Effect of the factoring contract;

p) Other contents not contrary to law regulations.

2. Amendments, supplements, and termination of the factoring contract are agreed upon by the parties in accordance with this Circular and relevant law regulations.

Article 17. Determination of factoring time limit, debt payment term and conversion of factoring debts into overdue debts

1. The factoring time limit and debt payment term shall be determined on the basis of the remaining payment time limit of the receivables under the contract for goods purchase and sale or service provision, and the refund term for factoring debt. The factoring time limit shall be agreed upon by the factor and the client in the factoring contract but must be less than one year.

2. The factor shall convert the factoring debt which the client cannot pay within the agreed term into an overdue debt and issue a notice of such conversion to the client. This notice must state at least the following: overdue factoring debt, time of conversion of the factoring debt into an overdue debt, and interest rate applicable to the overdue factoring debt. The period of overdue factoring debt is counted from the end of the factoring time limit.

3. For a factoring debt passing the debt payment term, the factor shall collect the factoring amount first and the interest later.

Article 18. Method of disbursement

1. The factor implements the disbursement into the account of the seller designated by the seller.

2. The factor must open and use a payment account at an organization providing payment service in Vietnam to perform disbursement, recovery of factoring debt, and international factoring charges according to the following principles:

a) The payment account prescribed in this Clause is a dedicated payment account for the purpose of factoring, ensuring compliance with the regulations on foreign exchange management on overseas lending and debt recovery activities of credit institutions, and foreign bank branches. The factor must not use this account for transferring or receiving money from transactions that do not arise from factoring activities;

b) Each international factoring transaction shall only be executed through an organization providing payment service via the account. The factor can use one account prescribed in this Clause for one or multiple international factoring transactions;

c) In case that the currency for refunding the factoring debt and paying the factoring charge is different from the factoring currency, the factor may open and use another dedicated payment account if it ensures compliance with the principles specified at Points a and b of this clause;

d) The factor shall clearly state and request the client to clearly state the purpose of the money transfer related to factoring so that the organization providing payment service can get the information needed to implement the reporting regime as prescribed by the State Bank of Vietnam.

3. Factors that are commercial banks or foreign bank branches are not required to open a dedicated payment account at an organization providing payment service in Vietnam to transfer disbursement funds, recover factoring debts with non-residents as prescribed in Clause 2 of this Article when conducting international factoring. In addition, factors shall monitor money transfer transactions related to factoring activities in accordance with the law regulations on accounting and bookkeeping for credit institutions and foreign bank branches.

4. The organization providing payment service via account in Vietnam, where the factor opens a dedicated payment account for disbursement and recovery of factoring debts as prescribed in Clauses 2 and 3 of this Article, shall verify and cross-check the documents presented by the factor in accordance with the law regulations. In addition, the organization providing payment service shall also report the status of foreign debt recovery under the form of international factoring as guided by the State Bank of Vietnam.

Article 19. Termination of factoring, handling of debts, exemption from or reduction of factoring interest rates and charges

1. The factor may terminate factoring and collect premature debts as agreed upon if detecting that the seller or purchaser provides untrue information or breaches the terms of the factoring contract or agreements on security measures. When terminating factoring and collecting premature debts as agreed upon in the factoring contract, the factor shall issue a notice of such termination and collection to the seller or purchaser. This notice must at least state the time of factoring termination and premature factoring debt to be collected; time limit for payment of the collected premature factoring debt, time of conversion of the factoring debt into an overdue debt, and interest rate applicable to the collected premature factoring debt, and return of the receivable to the seller or purchaser.

2. If the seller or purchaser cannot pay a mature debt, the factor may implement debt collection measures under the factoring contract or agreements on security measures and relevant law regulations. After implementing such measures, if the seller or purchaser still cannot fully pay the debt to the factor, he/she/it shall be obliged to continue paying the factoring debt and charges (if any) thereon to the factor.

 3. If the seller or purchaser or securing party is subject to a court’s ruling to open bankruptcy procedures or declare bankruptcy, the factor shall collect the debt from the seller or purchaser or securing party must comply with the laws on bankruptcy.

4. The factor may decide on interest or charge exemption or reduction for the seller or purchaser under the factor’s internal regulations

Article 20. Penalties for violations and compensation for damages

The factor and the client shall agree on penalties for violations and compensation for damages in accordance with the law regulations in cases that the factor or the client fails to comply with the terms of the factoring contract.

Article 21. Classification, provisioning for risks, and use of provisions to handle credit risks

The factor shall perform classification, provisioning, and use of provisions to handle risks related to factoring activities in accordance with law regulations on asset classification, provisioning levels, methods of provisioning for risks, and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches.

In cases that there is no commitment of refund from the seller to the factor, the factor shall classify and provision for risks concerning the purchaser.

Article 22. Electronic factoring

1. The factor and the client shall choose to conduct factoring through the use of electronic means (hereinafter referred to as electronic factoring). The implementation of electronic factoring must comply with this Circular, law regulations on anti-money laundering, regulations on electronic transactions, personal data protection, regulations on safety and security for providing online services in the banking industry, and other relevant law provisions.

2. When identifying and verifying client identification information via electronic means for clients establishing a relationship with the factor for the first time (except in cases that clients send information and data electronically authenticated through the SWIFT system or clients use electronic signatures in accordance with law regulations), the factor shall proceed as follows:

a) For resident clients: The factor shall identify and verify client identification information according to the regulations of the State Bank on the opening and use of payment accounts at the organization providing payment services.

b) For non-resident clients: The factor shall identify and verify client identification information based on a self-assessment of the risk level to select, decide on appropriate methods, forms, and technologies for electronic transaction authentication, ensuring safety and bearing any arising risks.

3. The factor independently shall decide on the measures, forms, and technologies to be used for electronic factoring for the entire or specific stages in the operational process, bear any arising risks (if any) and must meet at least the following requirements:

a) The measures, forms, and technologies selected by the factor must meet the standards of security, safety, and confidentiality as prescribed by the State Bank;

b) Applying forms of electronic transaction authentication to confirm client acceptance with the factor when conducting electronic transactions in the process of implementing electronic factoring in accordance with relevant law regulations.

c) Completely and specifically storing, maintaining documents, information, and client identification data throughout the implementation process of electronic factoring. The information and data must be securely stored, backed up, ensuring completeness and integrity to support verification, reconciliation, and client authentication during the implementation process of electronic factoring; addressing inquiries, complaints, disputes, and providing information upon request from competent authorities. The period of storing and preserving information and data of electronic factoring must comply with the law on anti-money laundering and the Law on Electronic Transactions.

d) The factor must inspect and evaluate the safety and security levels of the measures, forms, and technologies and temporarily suspend the service to upgrade, modify, or improve in case of any signs of insecurity.

dd) Assigning specific responsibilities to each individual and department involved in building, establishing, and operating the information system for the assessment and decision-making process in electronic factoring activities. In the case of arising risks, the factor must prepare mechanisms to identify the individuals and departments taking the responsibility and promptly addressing and resolving issues and arising risks to ensure the effectiveness and safety of the implementation process of electronic factoring.

4. The information system used for electronic factoring must comply with regulations on ensuring the safety of information system at level 3 or higher, according to the Government's regulations on ensuring the safety of information system by level and the State Bank’s regulations on the safety of information system in banking operations.

Article 23. Rights and obligations of the factor

1. The factor has the following rights:

a) Receiving the rights and legitimate interests related to the receivables according to the agreement;

b) Hiring another factor or unit providing service related to factoring and performing other services related to factoring;

c) Requesting clients and related parties to provide information, documents, and data related to the assessment of factoring;

d) Requesting clients and related parties to provide information, documents, and data related to security measures in case such measures are applied;

dd) Monitoring the recovery of factoring debts, collecting factoring charges, adjusting factoring charges, and adjusting interest rates and late payment interest.

e) Refusing to perform factoring when the sales contract or service provision is invalid or there is evidence proving that the submitted documents are forged;

g) Requiring the seller or the purchaser to refund the factoring debt as agreed;

h) Inspecting and monitoring the refund activities of the seller or the purchaser;

i) Other rights as agreed upon by the parties in accordance with law regulations.

2. The factor has the following obligations:

a) Providing information, documents, and data related to the authority's decision on factoring to competent state agencies upon request;

b) Maintaining and storing factoring records in accordance with law regulations and the internal regulations of the factor;

c) Other obligations as agreed upon by the parties in accordance with law regulations.

Article 24. Rights and obligations of the client

1. The client has the following rights:

a) Purchasing foreign currency from licensed credit institutions and foreign bank branches when fulfilling obligations under commitments to refund factoring debts;

b) Other rights as agreed upon by the parties in accordance with law regulations.

2. The client has the following obligations:

a) Providing complete, accurate, and truthful information, documents, and data related to the receivables; ensuring that the receivables are not used as security for other debt obligations and are not in dispute; taking legal responsibility for the accuracy, truthfulness, completeness, and validity of the information, documents, data, records, and supporting documents provided;

b) Transferring the rights and legitimate interests related to the receivables as agreed;

c) Fully and timely fulfilling the obligations and responsibilities committed to in the factoring contract;

d) Using the funds for legitimate purposes and refunding the debt as agreed;

dd) Cooperating with the factor and related parties in the implementation process of security measures (if any);

e) Sending a factoring notification to the purchaser and other related parties with obligations (if any);

g) Other obligations as agreed upon by the parties in accordance with law regulations.

 

Chapter III

OTHER SERVICES RELATED TO FACTORING

 

Article 25. Principles for providing other services related to factoring

1. The provision of other services related to factoring shall be carried out according to the agreement in the contract for providing other services related to factoring between the unit providing services related to factoring and the related parties, in compliance with relevant law regulations and commercial practices on factoring that do not contravene the fundamental principles of Vietnamese law.

2. The provision of other services related to factoring performed by the unit providing other services related to factoring must comply with the Law on Credit Institutions, relevant law regulations, and the license issued by the State Bank.

Article 26. Other services related to factoring

1. The unit providing other services related to factoring may provide other factoring-related services to the factors and clients in accordance with the Law on Credit Institutions and Clause 4, Article 3 of this Circular.

2. The charges for providing other services related to factoring shall be agreed upon by the units providing other services related to factoring and the related parties in accordance with law regulations.

Article 27. Contract for providing other services related to factoring

1. The contract for providing other services related to factoring is made in Vietnamese or a foreign language, or in both Vietnamese and a foreign language. The unit providing other services related to factoring shall agree with the factor and other related parties (if any) to use a foreign language in cases of providing other factoring-related services with foreign elements in accordance with the Civil Code.

For contracts providing other services related to factoring and other documents in the provision of other factoring-related services using a foreign language, the unit providing other services related to factoring must provide a Vietnamese translation (certified by the legal representative of the unit providing other services related to factoring or notarized) if requested by a competent authority.

2. The contract for providing other services related to factoring must include at least the following contents:

a) Names and addresses of the factor, the unit providing other services related to factoring, and other related parties (if any);

b) Information related to the contract for the sale of goods and services, and other relevant information to substantiate the execution of factoring and the provision of other services related to factoring;

c) Scope and content of the provision of other services related to factoring;

d) Charges for providing other services related to factoring;

dd) Rights and obligations of the parties;

e) Dispute resolution.

3. In addition to the contents prescribed in Clause 2 of this Article, the contract for providing other services related to factoring may include other contents as agreed upon by the parties, in accordance with this Circular and relevant law regulations.

Article 28. Rights and obligations of the unit providing other services related to factoring

The unit providing other services related to factoring shall exercise its rights and fulfill its obligations as agreed upon by the parties in accordance with law regulations.

 

Chapter IV

REPORTING AND ORGANIZATION OF IMPLEMENTATION

 

Article 29. Accounting recording, reporting information, and record keeping

1. The factor shall perform accounting recording for factoring activities in accordance with current laws on accounting recording regimes.

2. The factor shall report the status of factoring activities in accordance with the reporting regulations of the State Bank.

3. The factor shall maintain and store factoring records in accordance with the Law on Credit Institutions, with the retention period for factoring records in compliance with the law on archiving.

Article 30. Responsibilities of units under the State Bank

1. Responsibilities of the Department of Credit for Economic Sectors:

a) Monitoring and compiling the implementation status of factoring performed by the factors;

b) Serving as the focal point for resolving issues arising related to factoring activities and other services related to factoring;

c) Developing inspection plans and carrying out inspections (excluding the regulations on foreign exchange management) for factoring activities and other services related to factoring, in accordance with their functions and duties.

2. Responsibilities of the Department of Foreign Exchange Management:

a) Monitoring, compiling, and inspecting the implementation of factoring for non-residents;

b) Serving as the focal point for resolving issues arising related to the implementation of factoring for non-residents, and proposing amendments, supplements, or replacements to the regulations on foreign exchange management for factoring activities;

c) Developing inspection plans and carrying out inspections of the regulations on foreign exchange management to the implementation of factoring and other services related to factoring for non-residents, in accordance with regulations on inspecting compliance with the laws on currency and banking.

3. The Department of Finance and Accounting shall guide credit institutions and foreign bank branches in implementing accounting recording regimes for transactions related to factoring and other services related to factoring as prescribed in this Circular.

4. The Banking Supervision Agency shall assume the prime responsibility for and coordinate with relevant units to inspect, examine, and supervise the factoring activities and other services related to factoring of banks, and handle arising violations within their authority.

5. The State Bank branches in provinces and centrally run cities shall supervise, inspect, and examine the compliance of factors with this Circular according to their authorities.

 

Chapter V
IMPLEMENTATION PROVISIONS

 

Article 31. Transitional provisions

1. For factoring contracts signed before the effective date of this Circular and in compliance with the law regulations at the time of signing, the factors and the clients may continue to execute the signed contracts until the expiration of the contract term.

2. Amendments, supplements, or extensions to the factoring contracts specified in Clause 1 of this Article may only be made if the revised, supplemented, or extended content complies with the provisions of this Circular and relevant law regulations.

Article 32. Effect

1. This Circular takes effect on July 1, 2024.

2. This Circular repeals the Governor of the State Bank’s Circular No. 02/2017/TT-NHNN of May 17, 2017, prescribing the factoring activities of credit institutions and foreign bank branches.

Article 33. Organization of implementation

The Director General of the Department of Credit for Economic Sectors, the Director General of the Department of Foreign Exchange Management, the Heads of units under the State Bank, Directors of State Bank branches in provinces and centrally run cities, credit institutions, and foreign bank branches shall organize the implementation of this Circular./.

 

 

FOR THE STATE BANK GOVERNOR

DEPUTY GOVERNOR

 

Dao Minh Tu

 

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