Circular No. 18/2011/TT-NHNN guiding foreign exchange management for medium and long-term foreign loans of state-owned commercial banks

CIRCULAR

Guidelines on foreign exchange management for medium- and long-term foreign borrowing

of state-owned commercial banks

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Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Based on Decree No. 28/2005/PL-UBTVQH11 dated December 13, 2005 on foreign exchange;

Based on Decree No. 134/2005/NĐ-CP dated November 1, 2005 of the Government promulgating the regulations on foreign borrowing and debt repayment;

Based on Decree No. 160/2006/NĐ-CP dated December 28, 2006 of the Government detailing the implementation of the Foreign Exchange Law;

Pursuant to Decree No. 96/2008/NĐ-CP dated August 26, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Based on Directive No. 1568/CT-TTg dated August 19, 2010 of the Prime Minister on the implementation of Resolution No. 78-KL/TW dated July 26, 2010 of the Politburo;

The State Bank of Vietnam (hereinafter referred to as the State Bank) provides guidelines on foreign exchange management for the implementation of medium- and long-term foreign borrowing by state-owned commercial banks as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

Article 1. This Circular stipulates the principles, procedures, and formalities for reviewing and implementing medium- and long-term foreign borrowing not guaranteed by the Government of state-owned commercial banks.

Article 2. Medium- and long-term foreign borrowing of state-owned commercial banks guaranteed by the Government shall be implemented in accordance with current regulations on the issuance and management of Government guarantees.

The subjects to which this Circular applies are state-owned commercial banks, organizations, and individuals related to medium- and long-term foreign borrowing not guaranteed by the Government of state-owned commercial banks.

Article 3. Interpretation of terms in this Circular, the following terms are understood as follows:

1. Commercial bank (hereinafter referred to as "state-owned commercial bank") is a commercial bank established and operating under the Law on Credit Institutions, where the State owns more than fifty percent (50%) of the charter capital.

2. Foreign borrowing agreement means written contracts and agreements for medium- and long-term foreign borrowing, financial instruments that allow withdrawal of funds and create obligations to repay debts, specifying the terms and conditions of foreign borrowing.

3. Amendment agreement means a written agreement between the parties involved in foreign borrowing transactions regarding the addition or modification of the terms of the foreign borrowing agreement already signed.

4. Medium- and long-term foreign borrowing of state-owned commercial banks (hereinafter referred to as "foreign borrowing") is borrowing with a term exceeding one (01) year from foreign credit institutions and financial organizations that are non-residents or foreign borrowing through the issuance of international bonds on the international capital market by state-owned commercial banks.

5. Safety ratios in the operation of credit institutions (hereinafter referred to as "safety ratios") are ratios determined according to the current regulations of the State Bank on safety ratios in the operation of credit institutions.

6. Borrowing amount is the maximum withdrawal amount of foreign borrowing specified in the foreign borrowing agreement or the issuance plan of international bonds.

Article 4. Principles for implementing medium- and long-term foreign borrowing by state-owned commercial banks

Clause 1. State-owned commercial banks may only sign foreign borrowing agreements after obtaining written approval from the State Bank in accordance with Chapter II of this Circular.

Clause 2. After receiving written approval from the State Bank, state-owned commercial banks sign foreign borrowing agreements and register foreign borrowing in accordance with Chapter III of this Circular.

Clause 3. State-owned commercial banks have the obligation to use borrowed funds for their intended purpose and effectively, repay principal and interest according to the commitments made in the foreign borrowing agreement, bear all risks themselves, and be responsible under the law during the process of implementing foreign borrowing and debt repayment.

Clause 4. In the case of issuing international bonds, state-owned commercial banks must comply with the provisions of Chapter II of this Circular when requesting the State Bank's approval for the issuance plan of international bonds. Registration of confirmed limits, registration of bond issuance amounts, and other related matters shall be carried out in accordance with the State Bank's guidelines on foreign exchange management for the issuance of international bonds.

Clause 5. Withdrawal of funds, repayment of principal and interest of foreign borrowing can only be carried out after the foreign borrowing has been registered and confirmed by the State Bank. State-owned commercial banks may only implement fees related to foreign borrowing after obtaining the State Bank's approval for signing the foreign borrowing agreement.

Chapter II

PROCEDURES FOR APPROVAL OF FOREIGN BORROWING

Article 4. Documents for Requesting Approval of Foreign Loan

1. Prior to signing foreign loan agreements or requesting confirmation of international bond issuance limits, state commercial banks shall directly send or transmit via postal service to the State Bank (Department of Foreign Exchange Management) one set of documents requesting the State Bank's approval for foreign loans or approval of the international bond issuance project.

2. The documents for requesting approval of foreign loans include:

a) A document requesting the State Bank’s permission to sign foreign loan agreements;

b) A copy in the foreign language and its Vietnamese translation of the final draft of the foreign loan agreement;

c) The final draft of any security agreements related to the loan (if applicable);

d) Approval from the competent authority on the foreign borrowing plan according to the charter of the state commercial bank;

đ) Report on the borrowing plan, use of borrowed funds, projected sources of funds, repayment schedule, and risk management plans for exchange rate and interest rate fluctuations;

e) Report on the compliance with current safety ratio requirements of the state commercial bank at the time closest to the time of requesting the State Bank's approval for foreign loans; impact of foreign loans and their use on the safety ratios of the state commercial bank.

3. The documents for requesting approval of the international bond issuance project include:

a) A document requesting the State Bank’s approval for the international bond issuance project;

b) The international bond issuance project;

c) Approval from the competent authority on the international bond issuance project according to the charter of the state commercial bank;

d) Report on compliance with current safety ratio requirements of the state commercial bank at the time closest to the time of requesting the State Bank's approval for the international bond issuance project; impact of the issuance and use of funds from the bond issuance on the safety ratios of the state commercial bank.

Article 5. Basis for the State Bank to Consider and Approve Foreign Loans or International Bond Issuance Projects

1. Compliance with current legal provisions regarding safety ratios of state commercial banks.

State commercial banks may only borrow medium- and long-term foreign loans when they meet the current legal provisions regarding safety ratios, except for the following two cases:

a) There is a written approval from the Prime Minister or the State Bank regarding the state commercial bank not meeting one or more safety ratios before implementing the loan;

b) The loan is included in the second-tier capital of the state commercial bank and the implementation of the loan helps the state commercial bank comply with the legal provisions regarding safety ratios.

2. The value of the loan or issuance must be within the total limit of foreign trade loans of the country approved annually by the Prime Minister.

3. The content of the foreign loan agreement or the international bond issuance project does not contravene current Vietnamese legal provisions.

4. Compliance with other requirements under current laws on foreign exchange management; foreign borrowing and repayment; and other relevant legal provisions.

Article 6. Time for Reviewing Applications

Within fifteen (15) working days from the date of receipt of a complete and valid application, the State Bank shall issue its opinion in writing on whether to approve or not approve foreign loans or the issuance plan of international bonds of state commercial banks. In case of disapproval, the State Bank shall provide a written statement detailing the reasons.

Chapter III

REGISTRATION PROCEDURES FOR FOREIGN LOANS AND CHANGES TO FOREIGN LOANS

AMENDMENT TO FOREIGN DEBT LOANS

Article 7. Procedures, Formalities, and Application Documents for Registering Foreign Loans

1. After receiving approval from the State Bank, state commercial banks shall sign foreign loan agreements and related legal documents. Within thirty (30) days from the signing of the foreign loan agreement and before the withdrawal of funds, state commercial banks shall submit directly or via postal service to the State Bank one set of application documents for registering foreign loans.

2. The application documents for registering foreign loans include:

a) A foreign loan registration form (according to Form 01 attached).

b) Copies in the original language and Vietnamese translations of the foreign loan agreement and other legal agreements (if any), which have been signed, accompanied by a written commitment from the authorized representative of the state commercial bank regarding the consistency of the signed agreements and the final draft previously submitted to the State Bank.

Article 8. Time for Confirming Registration of Foreign Loans

1. The State Bank confirms the registration of foreign loans for state commercial banks within five (05) working days from the date of receipt of all required documents in the following cases:

a) Agreements signed officially conform with the final drafts previously submitted to the State Bank as stipulated in Article 4 of this Circular.

b) Agreements signed officially contain contents different from the final drafts previously submitted to the State Bank as stipulated in Article 4 of this Circular, but still ensure compliance with Vietnamese laws. In this case, state commercial banks must submit a report detailing the relevant contents to the State Bank.

2. If the application documents for registering foreign loans do not meet the requirements stipulated in Clause 1 of this Article, within five (05) working days from the date of receipt of the application, the State Bank will notify the state commercial bank to supplement and amend the application documents for registering foreign loans.

Article 9. Registration of Changes to Foreign Loans

1. In cases where the change agreement does not contravene current laws and maintains or reduces the loan amount (including the cancellation of the loan), state commercial banks shall sign the change agreement and register the changes according to the current legal regulations governing foreign borrowing and repayment by enterprises.

2. In cases where the change agreement increases the loan amount, state commercial banks shall follow the procedures for obtaining approval for increasing the loan amount as if applying for a new foreign loan under this Circular. After receiving written approval from the State Bank, state commercial banks shall sign the change agreement and register the changes according to the current legal regulations governing foreign borrowing and repayment by enterprises.

3. In cases where the change agreement contains changes not provided for in current legal documents, state commercial banks may only sign the change agreement and register the changes after receiving written approval and guidance from the State Bank.

Chapter IV

REPORT

Article 10. Periodic Reports

1. Monthly and annually, state commercial banks shall be responsible for reporting to the State Bank of Vietnam branch in the province or city where the main office of the state commercial bank is located, and sending copies to the State Bank of Vietnam (Department of Foreign Exchange Management) on the implementation of foreign loans according to the form in Appendix 02 of this Circular.

2. Reporting deadlines:

a) For monthly reports: no later than the 10th day of the following month.

b) For annual reports: no later than January 31 of the following year.

Article 11. Ad hoc Reports

State commercial banks shall prepare ad hoc reports upon request from the State Bank of Vietnam.

Chapter V

IMPLEMENTATION

Article 12. Decision-Making Authority

The Governor of the State Bank of Vietnam shall decide on the approval or disapproval of medium- and long-term foreign loans or international bond issuance plans of state commercial banks.

Article 13. Functions, Duties, and Coordination Mechanisms Among Units of the State Bank of Vietnam

1. Department of Foreign Exchange Management:

a) Lead and coordinate with relevant units within the State Bank of Vietnam to handle common issues related to medium- and long-term foreign loans of state commercial banks in accordance with current laws and directives from the Government.

b) Serve as the focal point to gather opinions from relevant units within the State Bank of Vietnam, compile these opinions, and submit them to the Governor of the State Bank of Vietnam for decision regarding the approval of foreign loans or international bond issuance plans of state commercial banks.

c) Announce the State Bank of Vietnam's opinion on approving or not approving foreign loans or international bond issuance plans of state commercial banks.

d) Implement registration and changes to registration of foreign loans of state commercial banks in accordance with this Circular.

e) Compile periodic data (quarterly, annually) and report to the Governor of the State Bank of Vietnam on the situation of foreign borrowing by state commercial banks.

2. Banking Inspection and Supervision Authority:

a) Coordinate with the Department of Foreign Exchange Management in researching and participating in opinions on state commercial banks borrowing abroad. The content of the participation includes: compliance with regulatory ratios for safety of state commercial banks currently applying for foreign loans; assessment of the impact of foreign loans and the use of borrowed funds on the safety ratios of state commercial banks; recommendations to agree or disagree (with clear reasons) with foreign loans or international bond issuance plans of state commercial banks.

b) Lead and coordinate with relevant units to conduct inspections, audits, and supervision of foreign borrowing and repayment activities of state commercial banks; handle violations by state commercial banks that violate regulations when borrowing abroad.

c) Participate in handling other emerging issues related to requests for foreign borrowing and foreign loans of state commercial banks as directed by the Governor of the State Bank of Vietnam.

3. Monetary Policy Department:

a) Coordinate with the Department of Foreign Exchange Management in researching and participating in opinions on state commercial banks borrowing abroad. The content of the participation includes: loan interest rates, purpose of borrowing, foreign currency sources for principal and interest repayments, monetary balance impacts arising from foreign borrowing of state commercial banks (if applicable), credit structure and capital mobilization structure of state commercial banks...; recommendations to agree or disagree (with clear reasons) with foreign loans or international bond issuance plans of state commercial banks.

b) Participate in handling other emerging issues related to requests for foreign borrowing and foreign loans of state commercial banks as directed by the Governor of the State Bank of Vietnam.

4. Legal Affairs Department:

a) Coordinate with the Department of Foreign Exchange Management in researching and providing opinions on legal aspects related to foreign loan applications of state commercial banks; recommend issues contrary to Vietnamese laws in foreign loan applications or international bond issuance plans of state commercial banks.

b) Participate in handling other emerging issues related to requests for foreign borrowing and foreign loans of state commercial banks as directed by the Governor of the State Bank of Vietnam.

5. Credit Department:

a) Coordinate with the Department of Foreign Exchange Management in researching and participating in opinions on guarantee and security forms for foreign loans of state commercial banks; recommendations to agree or disagree (with clear reasons) with foreign loans or international bond issuance plans of state commercial banks.

b) Participate in handling other emerging issues related to requests for foreign borrowing and foreign loans of state commercial banks as directed by the Governor of the State Bank of Vietnam.

Chapter VI

IMPLEMENTING PROVISIONS

Article 14. Effective Date

1. This Circular takes effect from October 15, 2011.

2. Medium- and long-term foreign loans of state commercial banks that have been registered and changed before the effective date of this Circular shall continue to be implemented according to the registration confirmation documents issued by the State Bank of Vietnam. In cases of post-effective date changes, state commercial banks shall implement in accordance with the provisions of this Circular.

3. Medium- and long-term foreign loans of state commercial banks that have signed loan agreements before the effective date of this Circular but have not yet been confirmed for registration, the implementation of loan registration shall follow the guidance of the State Bank of Vietnam for each specific case.

Article 15. Implementation Provisions

The Chief of the Office, the Chief Inspector and Supervisor of Banking, heads of units under the State Bank of Vietnam, Governors of State Bank of Vietnam branches in centrally governed provinces and cities, Chairmen of Boards of Directors, General Managers (Directors) of state commercial banks within their respective functions are responsible for organizing the implementation of this Circular./.