Circular No. 28/2012/TT-NHNN on bank guarantees

CIRCULAR

Provisions on Bank Guarantees

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Based on the Civil Code No. 33/2005/QH11 dated June 14, 2005;

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

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

Pursuant to the Foreign Exchange Ordinance No. 28/2005/PL-UBTVQH11 dated December 13, 2005;

BASED ON THE GOVERNMENT DECREE NO. 96/2008/NĐ-CP OF AUGUST 26, 2008, DEFINING THE FUNCTIONS, TASKS, POWERS AND ORGANIZATIONAL STRUCTURE OF THE STATE BANK OF VIETNAM;

Upon the proposal of the Credit Department Director;

The Governor of the State Bank of Vietnam issues this Circular on bank guarantees.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

THIS CIRCULAR REGULATES THE LETTERS OF GUARANTEE BUSINESS OF CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS FOR CUSTOMERS.

Article 2. Applicability

1. CREDIT INSTITUTIONS INCLUDE COMMERCIAL BANKS, COOPERATIVE BANKS, AND FINANCE COMPANIES.

2. Branches of foreign banks.

3. THE CENTRAL PEOPLE'S CREDIT UNION SHALL PERFORM THE LETTERS OF GUARANTEE BUSINESS IN ACCORDANCE WITH THE PROVISIONS APPLICABLE TO COOPERATIVE BANKS UNTIL IT IS CONVERTED INTO A COOPERATIVE BANK.

4. THE SUBJECTS (INCLUDING FOREIGN CREDIT INSTITUTIONS IN CASE OF LETTERS OF GUARANTEE CONTRACTS), INDIVIDUALS RELATED TO THE LETTERS OF GUARANTEE BUSINESS.

Article 3. Explanation of Terms

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

1. Bank Guarantee (HEREINAFTER REFERRED TO AS "GUARANTEE") IS A FORM OF CREDIT GRANTING WHERE THE GUARANTOR UNDERTAKES IN WRITING TO THE BENEFICIARY TO PERFORM THE FINANCIAL OBLIGATIONS ON BEHALF OF THE PRINCIPAL WHEN THE PRINCIPAL DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE OBLIGATIONS COMMITTED TO THE BENEFICIARY; THE PRINCIPAL MUST ACCEPT THE DEBT AND REPAY THE GUARANTOR ACCORDING TO THE AGREEMENT.

2. Guarantor ARE CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS THAT PERFORM THE LETTERS OF GUARANTEE BUSINESS.

3. Guaranteed Party ARE ORGANIZATIONS (INCLUDING CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS) AND INDIVIDUALS WHO ARE RESIDENTS AND ORGANIZATIONS WHO ARE NON-RESIDENTS GUARANTEED BY CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS.

4. Beneficiary ARE ORGANIZATIONS AND INDIVIDUALS WHO ARE RESIDENTS OR NON-RESIDENTS ENTITLED TO ENJOY THE LETTERS OF GUARANTEE ISSUED BY CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS.

5. Counter-guarantee IS A BANK GUARANTEE WHERE CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS (THE CORRESPONDENT GUARANTOR) UNDERTAKE TO THE GUARANTOR TO PERFORM THE FINANCIAL OBLIGATIONS FOR THE GUARANTOR IN CASE THE GUARANTOR PERFORMS THE GUARANTEE AND HAS TO PAY ON BEHALF OF THE CUSTOMER OF THE CORRESPONDENT GUARANTOR.

6. Confirmation of Guarantee IS A BANK GUARANTEE WHERE CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS (THE CONFIRMING GUARANTOR) UNDERTAKE TO THE BENEFICIARY TO ENSURE THE ABILITY TO PERFORM THE GUARANTEE OBLIGATIONS OF THE GUARANTOR TOWARDS THE PRINCIPAL. THE CONFIRMING GUARANTOR MUST PERFORM THE GUARANTEE OBLIGATIONS ACCORDING TO THE CONFIRMATION.

7. Joint Guarantee IS THE JOINT GUARANTEE OF:

a) TWO (2) OR MORE CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS GUARANTEEING THE OBLIGATIONS OF THE PRINCIPAL; OR

b) CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS AND FOREIGN CREDIT INSTITUTIONS GUARANTEEING THE OBLIGATIONS OF THE PRINCIPAL.

8. GUARANTEE CONTRACT IS THE AGREEMENT BETWEEN THE GUARANTOR AND THE PRINCIPAL AND ANY OTHER PARTIES INVOLVED (IF ANY) REGARDING RIGHTS, OBLIGATIONS, AND OTHER CONTENTS IN THE PERFORMANCE OF THE GUARANTEE.

9. Guarantee Commitment IS THE GUARANTEE DOCUMENT ISSUED BY THE GUARANTOR TO THE BENEFICIARY IN ONE OF THE FOLLOWING FORMS:

a) Guarantee Letter IS THE DOCUMENT IN WHICH THE GUARANTOR UNDERTAKES TO THE BENEFICIARY TO PERFORM THE FINANCIAL OBLIGATIONS ON BEHALF OF THE PRINCIPAL WHEN THE PRINCIPAL DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE OBLIGATIONS COMMITTED TO THE BENEFICIARY;

b) Guarantee Contract IS THE AGREEMENT BETWEEN THE GUARANTOR AND THE BENEFICIARY OR BETWEEN THE GUARANTOR, THE BENEFICIARY AND ANY OTHER PARTIES INVOLVED (IF ANY) REGARDING THE GUARANTOR'S UNDERTAKING TO PERFORM THE FINANCIAL OBLIGATIONS ON BEHALF OF THE PRINCIPAL WHEN THE PRINCIPAL DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE OBLIGATIONS COMMITTED TO THE BENEFICIARY;

c) OTHER FORMS OF UNDERTAKINGS ARE AGREED UPON BY THE PARTIES WITHOUT VIOLATING VIETNAMESE LAWS.

10. LOAN GUARANTEE IS THE UNDERTAKING OF THE GUARANTOR TO THE BENEFICIARY TO PAY THE DEBT ON BEHALF OF THE PRINCIPAL IN CASE THE PRINCIPAL DOES NOT PERFORM OR PERFORMS INCOMPLETELY OR LATELY THE LOAN REPAYMENT OBLIGATION.

11. PAYMENT GUARANTEE IS THE UNDERTAKING OF THE GUARANTOR TO THE BENEFICIARY TO PERFORM THE PAYMENT OBLIGATIONS ON BEHALF OF THE PRINCIPAL IN CASE THE PRINCIPAL DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE PAYMENT OBLIGATIONS AT DUE DATE.

12. BID GUARANTEE IS THE UNDERTAKING OF THE GUARANTOR TO THE BENEFICIARY (THE BID INVITER) TO ENSURE THE OBLIGATION OF THE PRINCIPAL TO PARTICIPATE IN THE BID. IF THE PRINCIPAL VIOLATES THE BID REGULATIONS AND DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE FINANCIAL OBLIGATIONS FOR BID PARTICIPATION, THE GUARANTOR WILL PERFORM ON BEHALF.

13. CONTRACT PERFORMANCE GUARANTEE IS THE UNDERTAKING OF THE GUARANTOR TO THE BENEFICIARY TO ENSURE THE PRINCIPAL'S FULL AND ACCURATE PERFORMANCE OF THE OBLIGATIONS UNDER THE CONTRACT SIGNED WITH THE BENEFICIARY. IF THE PRINCIPAL VIOLATES THE CONTRACT AND IS PENALIZED OR REQUIRED TO COMPENSATE THE BENEFICIARY BUT DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE FINANCIAL OBLIGATIONS, THE GUARANTOR WILL PERFORM ON BEHALF.

14. QUALITY GUARANTEE Quarter I (Q IS THE UNDERTAKING OF THE GUARANTOR TO THE BENEFICIARY TO ENSURE THE PRINCIPAL'S COMPLIANCE WITH THE QUALITY AGREEMENTS FOR PRODUCTS UNDER THE CONTRACT SIGNED WITH THE BENEFICIARY. IF THE PRINCIPAL VIOLATES THE QUALITY AGREEMENTS AND IS REQUIRED TO COMPENSATE THE BENEFICIARY BUT DOES NOT PERFORM OR PERFORMS INCOMPLETELY THE FINANCIAL OBLIGATIONS, THE GUARANTOR WILL PERFORM ON BEHALF.

15. ADVANCE PAYMENT REFUND GUARANTEE IS THE UNDERTAKING OF THE GUARANTOR TO THE BENEFICIARY TO ENSURE THE PRINCIPAL'S OBLIGATION TO REFUND THE ADVANCE PAYMENT UNDER THE CONTRACT SIGNED WITH THE BENEFICIARY. IF THE PRINCIPAL IS REQUIRED TO REFUND THE ADVANCE PAYMENT BUT DOES NOT REFUND OR REFUNDS INCOMPLETELY, THE GUARANTOR WILL PERFORM ON BEHALF.

16. OTHER TYPES OF GUARANTEES ARE TYPES OF GUARANTEES NOT PROHIBITED BY LAW AND CONSISTENT WITH INTERNATIONAL PRACTICES ISSUED BY CREDIT INSTITUTIONS AND FOREIGN BRANCHES OF BANKS AT THE REQUEST OF THE PRINCIPAL OUTSIDE THE TYPES OF GUARANTEES PROVIDED FOR IN CLAUSES 8, 9, 10, 11, 12, 13, 14, AND 15 OF THIS ARTICLE.

Article 4. Provisions on foreign exchange management in bank guarantees

1. The issuance of foreign currency guarantees by credit institutions and branches of foreign banks must be consistent with their scope of business and provision of foreign exchange services in both domestic and international markets.

2. Credit institutions and branches of foreign banks shall issue foreign currency guarantees for resident organizations and individuals for obligations arising from lawful transactions denominated in foreign currencies.

Article 5. Cases not eligible for guarantee, restricted guarantees, and implementation of limits

1. Cases where credit institutions and branches of foreign banks are not eligible to provide guarantees: As stipulated in Article 126 of the Law on Credit Institutions.

2. Cases subject to restricted guarantees: As stipulated in Article 127 of the Law on Credit Institutions.

3. When issuing guarantees, credit institutions and branches of foreign banks must comply with the provisions on credit limit in Article 128 of the Law on Credit Institutions.

Article 6. Determination of guarantee balance in implementing the credit limit regulations

1. The guarantee balance for the guaranteed party and related parties is the total balance of all issued guarantee commitments as specified in Clauses 8, 9, 10, 11, 12, 13, 14, 15, and 16 of this Circular and documentary credit issuance commitments made by credit institutions and branches of foreign banks for the guaranteed party and related parties.

2. When determining the guarantee balance to implement the credit limit regulations, credit institutions and branches of foreign banks may:

a) Exclude the guarantee balance in the following cases:

- Issuing guarantees for the guaranteed party which is another credit institution or branch of a foreign bank;

- Issuing guarantees based on corresponding guarantees provided by another credit institution or branch of a foreign bank;

- Issuing guarantees based on standby letters of credit issued by another credit institution or branch of a foreign bank;

- Issuing confirmation of guarantees at the request of the guarantor which is another credit institution or branch of a foreign bank if the relevant parties agree (in writing) that the confirming guarantor has the right to debit and demand repayment from the guarantor of the amount paid on behalf of the guaranteed party when fulfilling the guarantee obligation.

b) Exclude the guarantee balance and the balance of commitment issuances under documentary credit forms secured by deposits in Vietnamese dong, foreign currency; gold; government bonds of the guaranteed party and/or third parties.

Credit institutions and branches of foreign banks shall independently determine the deduction rate for each type of collateral according to the provisions herein, based on the assessment of the recoverability when disposing of such collateral, but it shall not exceed the maximum deduction rate for collateral as prescribed by the State Bank of Vietnam regarding asset classification, provisioning levels, risk provisioning methods, and the use of provisions to address risks in the operations of credit institutions and branches of foreign banks.

Article 7. Language Usage

1. Documents related to guarantee transactions shall be established in Vietnamese.

2. In cases where foreign languages need to be used, the relevant parties may agree to use additional foreign languages in documents related to guarantee transactions. In case there is a difference in interpretation between the Vietnamese and foreign language versions, the Vietnamese version shall be the legal basis.

Article 8. Application of Customary Practices and Dispute Resolution

1. The guarantor, guaranteed party, and related parties may agree to apply:

a) International trade usages promulgated by the International Chamber of Commerce;

b) Other trade usages not contrary to Vietnamese law.

2. The parties may agree on applicable laws, foreign courts, or arbitrations to resolve disputes arising from guarantee transactions in accordance with the law.

Chapter II

SPECIFIC PROVISIONS

Article 9. Scope of Guarantee Obligations

The guarantor may commit to guaranteeing part or all of the following obligations of the guaranteed party, specifically:

1. The obligation to repay principal, interest on loans, and other related costs of the loan.

2. The obligation to pay for purchasing raw materials, goods, machinery, equipment, and project implementation expenses or investment, production, business plans, or living services.

3. The obligation to pay taxes, fees, and other financial obligations to the State.

4. The obligation when participating in bidding.

5. The obligation in performing contracts, ensuring product quality, receiving and refunding advance payments.

6. Other lawful obligations agreed upon by the parties.

Article 10. Conditions for the Guaranteed Party

1. Having full civil legal capacity and civil conduct capacity as prescribed by law.

2. The guarantee obligation and transactions generating the guarantee obligation must be lawful.

3. Possess the ability to fully and accurately fulfill the committed obligations with relevant parties in the guarantee relationship.

Article 11. Guarantees for Non-Resident Organizations

1. Cases Eligible for Guarantee

a) Credit institutions guaranteeing non-resident enterprises established and operating abroad with capital contributions from Vietnamese enterprises in the form of direct foreign investment to implement projects or business plans consistent with the lawful scope of activities of the guaranteed party;

b) Credit institutions, branches of foreign banks guaranteeing organizations when:

- The beneficiary of the guarantee is a resident, or;

- The guaranteed party has deposited a full 100% value of the guarantee as collateral.

c) Other cases can only be implemented with the written approval of the State Bank.

2. Conditions for the Guarantor

a) Credit institutions, branches of foreign banks must be permitted by the State Bank to operate and provide foreign exchange services on international and domestic markets, including foreign currency guarantees;

b) Within six consecutive months prior to the time of considering granting guarantees to non-residents, credit institutions, branches of foreign banks have not been administratively penalized for violations of foreign exchange management regulations, as stipulated in Articles 126, 127, 128, and 130 of the Law on Credit Institutions.

c) Have internal regulations and risk management in guarantee activities for non-residents;

d) Have a plan to control and handle risks in guarantee activities for non-residents;

đ) Not violating the reporting requirements to the State Bank regarding guarantees for non-residents.

3. Conditions for the Guaranteed Party

a) Being a non-resident eligible for guarantee under this Circular;

b) Complying with the provisions of Clause 2 and Clause 3 of Article 10 of this Circular;

c) The rights and obligations of the guaranteed party under the guarantee do not contravene Vietnamese law.

4. In addition to the provisions of Clauses 1, 2, and 3 of this Article, other contents in the process of guaranteeing non-residents must be carried out in accordance with this Circular.

Article 12. Documents for Requesting Guarantee

1. Based on the actual situation of guarantee operations of credit institutions, branches of foreign banks, and specific characteristics of each group of customer types, credit institutions, branches of foreign banks shall provide detailed guidance on the requirements for various types of documents and materials that customers need to submit for the credit institution, branch of foreign bank to consider and guarantee.

2. The documents for requesting guarantee include the following main types of documents:

a) A request letter for guarantee;

b) Documents about the guaranteed party;

c) Documentation on the obligations being guaranteed;

d) Documents about collateral assets (if any);

Article 13. Guarantee Contract

1. To implement the guarantee, the guarantor, the guaranteed party, and related parties (if any) must agree to sign a guarantee issuance contract.

2. The main contents of the guarantee issuance contract are as follows:

a) Legal regulations applicable;

b) Information about the parties involved in the guarantee relationship:

- Guarantor;

- Guaranteed party;

- Beneficiary;

- Other related parties (if any).

c) Amount and currency of the guarantee;

d) Purpose of the guarantee;

đ) Form of issuance of the guarantee commitment;

e) Conditions for performing the guarantee obligation;

g) Security measures for the obligations of the guaranteed party, value of the secured assets (if any);

h) Rights and obligations of the parties;

i) Guarantee fee;

k) Clause on reduction or exemption of the guarantee amount (if any);

l) Assignment of rights and obligations of the parties;

m) Commitment to assume debt repayment, compulsory interest rate on assumed debt, and repayment (in case the guarantor fulfills the guarantee obligation);

n) Dispute resolution;

o) Contract number, date of signing, and validity of the contract;

p) Other contents.

2. Amendments, supplements, or cancellation of the contents of the guarantee issuance contract shall be agreed upon and decided by the parties based on ensuring compliance with current laws on guarantees, secured transactions, and other relevant regulations.

Article 14.

Guarantee Commitment

1. Based on the agreement contents of the parties in the Guarantee Issuance Contract, the guarantor issues a guarantee commitment to the beneficiary with the following main contents:

a) Legal regulations applicable;

b) Number, form of the guarantee commitment;

c) Information about the parties involved in the guarantee relationship:

- Beneficiary;

- Guarantor;

- Guaranteed party;

- Other related parties (if any).

d) Date of issuance of the guarantee, effective date of the guarantee, and/or circumstances under which the guarantee becomes effective;

đ) Date of expiration and/or circumstances under which the guarantee expires;

e) Amount of the guarantee and currency used for payment;

g) Purpose of the guarantee;

h) Scope of guarantee obligations;

i) Rights and obligations of the parties (if any);

k) Provisions on assignment of rights and obligations of the parties (if any);

l) Conditions for fulfilling guarantee obligations;

m) Clause on reduction or exemption of the guarantee amount (if any);

n) Provisions on dispute resolution (if any);

o) Other contents.

2. Amendments, supplements, or cancellation of the contents of the guarantee commitment shall be agreed upon by the related parties.

3. Credit institutions, foreign bank branches base on the contents of the guarantee issuance contract, guarantee commitment in this Circular, and relevant laws to design, print, and issue sample guarantee commitments to carry out guarantee business throughout their systems according to internal regulations of credit institutions, foreign bank branches. The design, printing, issuance, and use of sample guarantee commitments must be implemented, managed, and supervised regularly like securities to ensure safety in issuing guarantee commitments.

4. For guarantee commitments issued through international communication networks between banks, in addition to implementing the process of issuing guarantee commitments through international communication networks between banks, the guarantor must have a monitoring and management process for issuing guarantees through this network safely and effectively supervise its operation.

Article 15. Authority to Sign Guarantee Issuance Contracts and Guarantee Commitments

1. Guarantee issuance contracts and guarantee commitments of the guarantor must be signed by:

a) Legal representative;

b) Risk management manager for guarantee operations;

c) Guarantee assessment officer.

2. Credit institutions, foreign bank branches stipulate the delegation of authority to sign guarantee issuance contracts and guarantee commitments to the legal representative, risk management manager for guarantee operations, and guarantee assessment officer for positions within their system in writing or issue documents defining the authority to sign guarantee documents in accordance with this Circular and legal provisions.

Article 16. Guarantee for the Obligations of the Guaranteed Party

1. Credit organizations, foreign bank branches and the guaranteed party shall agree on the application of security measures or the non-application of such measures.

2. Credit organizations, foreign bank branches shall stipulate conditions and principles for applying each security measure and conditions and principles for cases where security measures are not applied in guarantee issuance activities, in accordance with the characteristics and management requirements for each customer category and the characteristics and situation of credit organizations, foreign bank branches, based on compliance with legal regulations on guarantee activities and secured transactions.

In cases where security measures by assets (third-party guarantees and/or unsecured guarantees) are not applied for a guarantee amount, the guaranteed party must meet the following minimum conditions:

a) Fulfilling all conditions prescribed in Article 10 or Clause 3 of Article 11 of this Circular;

b) Being a customer eligible for credit without asset-based security measures from credit organizations, foreign bank branches;

c) At the time of requesting the issuance of a guarantee, the guaranteed party does not violate credit and payment relationships at credit organizations, foreign bank branches.

3. When the guarantor uses third-party assets to secure a guarantee amount, credit organizations, foreign bank branches must specify specific conditions for the collateral assets and conditions for the third party according to the principle of ensuring safety and effectiveness.

4. The establishment of security measures for the entire or part of the obligations of the guaranteed party towards the guarantor shall be agreed upon by the parties involved.

Article 17. Guarantee Fee

1. The guarantor agrees on the level of guarantee fee to be charged to the guaranteed party. In cases of reciprocal guarantees or confirmation of guarantees, the level of guarantee fee shall be agreed upon by the parties based on the guarantee fee accepted by the guaranteed party.

2. In cases of joint guarantees, the parties shall agree and unify the level of guarantee fee each party will enjoy based on the agreement on the proportion of participation in joint guarantees and the guarantee fee received by the guaranteed party.

3. In cases where credit organizations, foreign bank branches guarantee a joint obligation, credit organizations, foreign bank branches shall agree with each customer on the level of fee to be paid based on the corresponding joint obligation of each customer.

4. In cases where the guarantee amount is in foreign currency, the parties may agree to charge the guarantee fee in foreign currency or convert it into Vietnamese dong at the selling rate of the guarantor at the time of charging the fee.

5. During the guarantee period, the parties may agree to adjust the fee level.

Article 18. Guarantee Period

1. The guarantee period starts from the date of issuance of the guarantee or when the guarantee becomes effective according to the agreement between the guarantor and related parties until the expiration date of the guarantee recorded in the guarantee commitment. If the guarantee commitment does not specify the expiration date of the guarantee, the expiration date of the guarantee shall be determined at the time the guarantee obligation ceases to be effective as prescribed in Article 21 of this Circular.

2. In cases where the expiration date of the guarantee falls on a holiday or public holiday, the expiration date shall be moved to the next working day.

3. Extension of the guarantee period shall be agreed upon by the parties.

Article 19. Exemption from Performance of Guarantee Obligations

1. In cases where the guarantor releases the obligor from performing the obligation, the beneficiary of the guarantee and/or related parties still must perform the obligations they have committed to the guarantor, except in cases where the parties have agreed otherwise or where joint liability obligations are performed in accordance with the provisions of the law.

2. In cases where one of the co-guarantors is exempted from performing their portion of the guarantee obligation, the other co-guarantors still must perform their guarantee obligations according to the guarantee commitment.

Article 20. Performance of Guarantee Obligations

1. Within the guarantee period, the guarantor or the confirming party shall fulfill the guarantee obligation when the guarantor presents a request for performance of the guarantee obligation along with lawful and valid documents, files, and certificates (if any) that fully satisfy the conditions stipulated in the guarantee commitment or the confirmation commitment. The guarantor or the confirming party shall be responsible for fulfilling the guarantee obligation towards the guarantor within the latest five working days from the date the guarantor submits all necessary documents for requesting performance of the guarantee obligation. In case of refusal to perform the guarantee obligation, the guarantor or the confirming party must provide a written response detailing the reasons for refusal.

2. Upon performing the guarantee obligation, the guarantor or the confirming party shall base on the debt assumption agreement in the guarantee contract or the mutual agreement among the parties, documents, and certificates proving the performance of the guarantee obligation to record the debt repayment into the mandatory loan account for the amount repaid on behalf of the beneficiary or the corresponding guarantor or the guarantor in the confirmation guarantee, and send a written notification about the repayment to the relevant parties involved in the guarantee.

3. The parties receiving repayment have the obligation to immediately repay the amount repaid on their behalf by the guarantor or the confirming party on the same day. In cases where immediate repayment is not possible, based on the guarantee contract or the mutual agreement among the parties, the guarantor or the confirming party shall determine the mandatory loan term, repayment period, and applicable interest rate for the repayment amount to the beneficiary or the corresponding guarantor or the guarantor in the confirmation guarantee. The maximum applicable interest rate for the loan shall not exceed 150% of the current interest rate for loans with similar terms. The loan term commencement date shall be the date the guarantor or the confirming party performs the repayment.

4. In cases of repayment in foreign currency, after implementing the provisions of Clause 1, Clause 2, and Clause 3 of this Article, credit institutions, branches of foreign banks shall record the mandatory loan as follows:

a) Record the debt in the foreign currency as stipulated in the guarantee commitment,

b) Record the debt in Vietnamese dong equivalent to the value of the foreign currency that the credit institution or branch of a foreign bank has repaid on behalf of the guarantor at the selling exchange rate published by the guarantor at the time of payment, based on the foreign currency balancing capacity of the credit institution or branch of a foreign bank.

Article 21. Termination of Guarantee Obligations

The guarantee obligations of the guarantor shall terminate in the following cases:

1. The obligation of the guaranteed party has been terminated.

2. The guarantor has performed the guarantee obligation according to the guarantee commitment.

3. The guarantee is rescinded or replaced by another form of security.

4. The validity period of the guarantee commitment has expired.

5. The beneficiary waives the guarantor's guarantee obligation.

6. The guarantee obligation terminates in other cases as prescribed by law.

7. By agreement among the parties.

Article 22. Joint Guarantees

1. Principles, conditions, and procedures for organizing and implementing joint guarantees shall be carried out in accordance with this Circular, the State Bank's regulations on credit syndication by credit institutions and foreign bank branches for customers, and relevant laws.

2. Parties participating in joint guarantees may provide joint guarantees for organizations and individuals who are residents and non-residents. In the case of joint guarantees for non-resident organizations, the participating parties must comply with the provisions of Article 11 of this Circular.

3. Parties participating in joint guarantees shall jointly and severally bear responsibility for performing the guarantee obligation, except where otherwise agreed. In the event that the lead credit institution or foreign bank branch must perform the guarantee obligation on behalf of the guaranteed party, the participating parties shall immediately repay the lead credit institution or foreign bank branch the corresponding amount according to the agreed ratio of participation in the joint guarantee.

4. When providing joint guarantees for non-resident organizations, credit institutions and foreign bank branches shall report according to Form 01 and Form 02 based on the guarantee ratio and the repayment ratio for non-resident organizations.

Article 23. Guarantee for a Joint Liability Obligation

Credit institutions and foreign bank branches providing guarantee for a joint liability must base it on a joint rights and obligations contract between the parties.

Article 24. Internal Regulations of Credit Institutions and Foreign Bank Branches on Guarantees

1. Based on the provisions of this Circular and related laws, credit institutions and foreign bank branches shall issue internal regulations on guarantee operations for organizations and individuals who are residents and non-resident organizations.

2. Credit institutions and foreign bank branches shall submit one copy of the internal regulations on guarantee operations to the Credit Department immediately upon issuance or amendment.

Article 25. Rights of the Guarantor

1. Accept or reject the request for a guarantee from the guaranteed party or the counter-guarantor.

2. Request the confirmation party to confirm the guarantee for the guarantor's portion of the guarantee for the guaranteed party.

3. Request the guaranteed party, the counter-guarantor, and related parties to provide documents and information related to the guarantee assessment and collateral (if any).

4. Require the guaranteed party to take measures to secure the obligation guaranteed by the credit institution or foreign bank branch (if necessary).

5. Charge guarantee fees, adjust guarantee fees; apply and adjust interest rates and penalty interest rates as agreed.

6. Refuse to perform the guarantee obligation when the guarantee commitment expires or the payment request does not meet the conditions stipulated in the guarantee commitment, or there is evidence proving that the presented documents are forged.

7. Record a debit against the guaranteed party or the counter-guarantor immediately upon performing the guarantee obligation, and require the guaranteed party or the counter-guarantor to immediately repay the amount paid on their behalf according to the commitment.

8. Request other joint guarantors to immediately repay the amount paid on behalf of the guaranteed party in the case where the member acting as the lead party performs the guarantee obligation in a joint guarantee.

9. Dispose of the collateral according to the agreement and the provisions of the law.

10. Transfer its rights and obligations to another credit institution or foreign bank branch according to the agreement of the related parties and the approval of the State Bank for each specific case.

11. Initiate legal proceedings as prescribed by law when the guaranteed party or the counter-guarantor breaches the committed obligations.

12. Other rights agreed by the parties in compliance with the provisions of the law.

Article 26. Rights of the Counter-guarantor Party

1. Accepting or rejecting the customer's request for issuance of a counter-guarantee.

2. Requesting the guarantor to issue a guarantee for the obligation of its customer towards the beneficiary of the guarantee.

3. Requiring the customer to provide documents and information related to the assessment of the counter-guarantee and collateral (if any).

4. Requesting the customer to take measures to secure the obligation guaranteed by the credit institution or foreign bank branch (if necessary).

5. Charging fees for the guarantee according to the agreement.

6. Refusing to perform the counter-guarantee obligation when the guarantee commitment expires or the payment request documents do not meet the conditions stipulated in the guarantee commitment or there is evidence proving that the presented documents are forged.

7. Recording a debit entry for the beneficiary immediately upon performing the counter-guarantee obligation for the guarantor, requesting the beneficiary to repay on the same day the amount that the counter-guarantor has performed under the guarantee commitment.

8. Handling the collateral assets of the beneficiary according to the agreement and the provisions of the law.

9. Initiating legal proceedings as prescribed by law when the beneficiary or the guarantor breaches their committed obligations.

10. Transfer its rights and obligations to another credit institution or foreign bank branch according to the agreement of the related parties and the approval of the State Bank for each specific case.

11. Other rights agreed by the parties in compliance with the provisions of the law.

Article 27. Rights of the Guarantee Confirmation Party

1. Accepting or rejecting the guarantor's or customer's request for guarantee confirmation.

2. Requesting the customer or guarantor to provide relevant information materials for the evaluation of the guarantee and collateral (if any).

3. Requesting the customer or guarantor to take measures to secure the obligation confirmed by the guarantor (if necessary).

4. Agreeing with the guarantor and/or customer on the obligation to confirm the guarantee, charging fees for guarantee confirmation, and the procedures for repayment of the confirmed guarantee obligation that the guarantee confirmation party has performed for the beneficiary.

5. Recording a debit entry for the guarantor or beneficiary immediately upon performing the guarantee confirmation obligation, requesting the guarantor or beneficiary to repay on the same day the amount that the guarantee confirmation party has paid on behalf of according to the commitment.

6. Handling the collateral assets of the guarantor or beneficiary according to the agreement and the provisions of the law.

7. Initiating legal proceedings as prescribed by law when the beneficiary and guarantor breach their committed obligations.

8. Transferring rights and obligations to another credit institution or foreign bank branch according to the agreement of the related parties and the approval of the State Bank in each specific case.

9. Refusing to perform the guarantee obligation when the guarantee commitment expires or the payment request documents do not meet the conditions stipulated in the guarantee commitment or there is evidence proving that the presented documents are forged.

10. Other rights agreed upon by the parties in accordance with the provisions of the law.

Article 28. Obligations of the Guarantor, Counter-guarantor, and Guarantee Confirmation Party

1. Having the responsibility to provide complete information and documents related to the authority to issue guarantee commitments and to fulfill the guarantor's obligations to the beneficiary, the guarantee recipient, and other related parties (if any) upon request.

2. Conducting inspections and supervision of the compliance with guarantee commitments by the beneficiary during the validity period of the guarantee.

3. Fulfilling the guarantee obligation fully and correctly when the guarantee recipient presents complete and valid documents and certificates as stipulated in the guarantee commitment and the guarantee confirmation commitment regarding the performance of the guarantor's and guarantee confirmation party's obligations.

4. The counter-guarantor in a counter-guarantee or the guarantor in a guarantee confirmation has the obligation to repay immediately the amount that the guarantor in the counter-guarantee or the guarantee confirmation party has performed on behalf of the beneficiary.

5. Returning the full collateral asset (if any) and related documents to the beneficiary when settling the guarantee issuance contract.

6. Providing a written response to the customer's complaint about the refusal to perform the guarantee within 10 (ten) working days from the date of receipt of the customer's complaint letter.

7. Implementing the retention of guarantee files in accordance with the provisions of the law.

8. Other obligations agreed by the parties in compliance with the provisions of the law.

Article 29. Rights and Obligations of the Guaranteed Party

1. The guaranteed party has the following rights:

a) Refuse requests from the guarantor, counter-guarantor, and confirmation party that are not in accordance with the agreements in the guarantee contract or the guarantee commitment;

b) Require the guarantor, counter-guarantor, and confirmation party to fulfill their obligations and responsibilities as committed;

c) Initiate legal proceedings as prescribed by law when the guarantor, counter-guarantor, and confirmation party violate their committed obligations;

d) Exercise rights and perform obligations as prescribed by law when the parties involved carry out the transfer of guarantee rights and obligations among themselves regarding the guarantee amount;

2. The guaranteed party has the following obligations:

a) Provide complete, accurate, and truthful information and documents related to the guarantee and bear legal responsibility for the accuracy, truthfulness, and completeness of the provided information and documents;

b) Fulfill all obligations and responsibilities as committed and as stipulated in the guarantee contract within the agreed timeframe;

c) Immediately repay the guarantor, counter-guarantor, and confirmation party the amount they have paid on behalf of the guaranteed party and any costs incurred from fulfilling the guarantee obligation according to the guarantee contract or the agreement between the parties;

d) Accept inspection, control, and supervision of the guarantor's, counter-guarantor's, and confirmation party's guarantee obligations and responsibilities. Have the duty to report situations related to guarantee transactions to the guarantor, counter-guarantor, and confirmation party;

e) Voluntarily cooperate without conditions with the guarantor, counter-guarantor, confirmation party, and related parties during the process of handling collateral (if applicable);

e) Other obligations agreed upon by the parties in compliance with the provisions of the law.

Article 30. Rights and Obligations of the Guarantee Recipient

1. Rights of the Guarantee Recipient

a) To request the guarantor and confirming guarantor to fulfill their obligations and responsibilities as committed in the guarantee commitment;

b) Initiate legal proceedings as prescribed by law when the guarantor and confirmation party violate their committed obligations;

c) Verify the legality and validity of the guarantee commitment;

2. Obligations of the Beneficiary

a) Fulfill the obligations accurately and completely in contracts related to the guarantee obligation, ensuring consistency with the content of the guarantee commitment.

b) Promptly notify the guarantor, confirmation party, and related parties of any signs of violation or misconduct by the guaranteed party;

 

Chapter III

 

REPORTING AND IMPLEMENTATION ORGANIZATION

Article 31. Accounting Entries and Reporting Information

1. Credit institutions and foreign bank branches must perform accounting entries and monitor all issued guarantees in accordance with the regulations.

2. Credit institutions and foreign bank branches shall report on the implementation of guarantees in accordance with the reporting regulations of the State Bank of Vietnam and as stipulated in this Circular;

3. Credit institutions and foreign bank branches shall report on guarantees granted to non-resident organizations using Form 01 within two working days from the date of issuing the guarantee commitment, and report on payments made on behalf of non-resident organizations using Form 02 within one working day from the date of payment, and record the debit for non-resident organizations;

4. Credit institutions and foreign bank branches shall continue to report on payments made on behalf of non-resident organizations according to the reporting system for foreign lending and debt recovery as prescribed by law on foreign exchange management for credit institutions and foreign bank branches if, after one month from the date of payment and recording the debit, the non-resident organization has not fully repaid the debt to the credit institution or foreign bank branch;

5. Aggregate and report guarantee data for non-resident organizations to the State Bank of Vietnam (Credit Department) using Form 03;

Article 32. Implementation Organization

1. Responsibilities of the Credit Department

a) Serve as the focal point for receiving internal regulations on guarantee business of credit institutions and foreign bank branches as stipulated in Article 24 of this Circular; monitor and aggregate the implementation of guarantee activities by credit institutions and foreign bank branches;

b) Serve as the focal point for resolving issues arising from guarantee business;

c) Serve as the focal point for monitoring and handling cases as specified in point d, Clause 2, Article 11, Clause 10, Article 25, Clause 10, Article 26, and Clause 8, Article 27 of this Circular;

2. Responsibilities of the Inspection and Supervision Agency

a) Take the lead and coordinate with relevant units to inspect, audit, and supervise the guarantee activities of credit institutions and foreign bank branches and handle violations according to their authority;

b) Provide the Credit Department with information on compliance with regulations on ensuring safety in the operations of credit institutions and foreign bank branches related to banking guarantee activities, and credit institutions and foreign bank branches that have been penalized for violations in guarantee activities;

3. Responsibilities of the Financial and Accounting Department

Guide accounting entries for transactions related to guarantee activities of credit institutions and foreign bank branches as stipulated in this Circular;

4. Responsibilities of the Foreign Exchange Management Department

Monitor and manage capital flows related to credit institutions and foreign bank branches paying debts on behalf of non-resident organizations and recoveries from such payments;

5. Responsibilities of the State Bank of Vietnam Branches in Provinces and Central Cities

Supervise, inspect, and audit credit institutions and foreign bank branches in their compliance with this Circular according to their functions and duties; report to the Governor of the State Bank of Vietnam on violations and handle them according to their authority;

Chapter IV

IMPLEMENTING PROVISIONS

Article 33. Transitional Provisions

Guarantee commitments signed before the effective date of this Circular shall continue to be implemented according to the signed agreements until the guarantee obligation ends. Any amendments or supplements to these commitments may only be made if the amended or supplemented content complies with the provisions of this Circular;

Article 34. Effective Date

1. This Circular takes effect from December 2, 2012, replacing Decision No. 26/2006/QD-NHNN dated June 26, 2006 of the State Bank of Vietnam on the issuance of the Banking Guarantee Regulation.

2. The Director of the Office, the Head of the Credit Department, the Heads of relevant units under the State Bank, the Governors of the State Bank branches in provinces and centrally-administered cities, the Chairmen of the Management Boards, the Chairmen of the Member Councils, and the General Directors (Directors) of credit organizations, foreign bank branches, and individuals and entities related to guarantee activities shall be responsible for implementing this Circular./.