Circular No. 43/2014/TT-NHNN on foreign currency loans by credit institutions and branches of foreign banks for resident borrowers

CIRCULAR

Regulations on lending in foreign currency to credit institutions,

branches of foreign banks for resident borrowers

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

No. 06/2013/UBTVQH13 dated March 18, 2013;

Pursuant to Decree No. 28/2005/PL-UBTVQH11 dated December 13, 2005 on Foreign Exchange and Decree No. 6/2013/PL-UBTVQH13 dated March 18, 2013 amending and supplementing certain provisions of the Foreign Exchange Decree;

Pursuant to Decree No. 70/2014/NĐ-CP dated July 17, 2014 of the Government detailing the implementation of certain provisions of the Foreign Exchange Ordinance and the Ordinance amending and supplementing certain provisions of the Foreign Exchange Ordinance;

Pursuant to Decree No. 156/2013/NĐ-CP dated November 11, 2013, of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Article 1.

The Governor of the State Bank of Vietnam issues this Circular regulating foreign currency loans by credit institutions and branches of foreign banks for resident borrowers.

Article 1. Scope of Regulation

This Circular regulates loans in foreign currency for domestic resident customers by credit organizations and branches of foreign banks.

Article 2. Applicability

1. Credit organizations and branches of foreign banks permitted to operate in foreign exchange may implement loans in foreign currency for customers.

2. Domestic resident customers borrowing capital at credit organizations and branches of foreign banks shall comply with the laws governing lending activities.

Article 3. Requirements for loans in foreign currency

1. Credit organizations and branches of foreign banks may consider and decide to grant loans in foreign currency for the following capital requirements:

a) Short-term, medium-term, and long-term loans to pay for imports of goods and services abroad when borrowers have sufficient foreign currency from production and business revenue to repay the loan;

b) Short-term loans to state-owned enterprises assigned import quotas for gasoline in 2015 by the Ministry of Industry and Trade to pay for imports from abroad when the borrower does not have or does not have sufficient foreign currency revenue from business operations to repay the loan. The provision herein shall be implemented until December 31, 2015;

c) Short-term loans to meet domestic capital needs to implement production and business plans for goods exported through border gates of Vietnam where the borrower has sufficient foreign currency from export revenues to repay the loan; when the credit institution or branch of a foreign bank disburses the loan, the borrower must sell the borrowed foreign currency to the credit institution or branch of a foreign bank in the form of spot foreign exchange transactions (spot), except in cases where the borrower's need for capital is to execute transactions that must be denominated in foreign currency under the law. The provision herein shall be implemented until December 31, 2015;

d) Loans for direct investment abroad for national key projects approved by the National Assembly, the Government or

2. Credit institutions, branches of foreign banks may consider granting loans in foreign currency for capital requirements outside those specified in Clause 1 of Article 3 of this Circular, which fall within priority areas for promoting production and business development as stipulated in Resolutions, Decrees, Decisions, Directives and other documents of the Government,

Article 4. Procedures and formalities for approving foreign currency loans

1. When there is a need for loans in foreign currency as prescribed in Clause 2 of Article 3 of this Circular, credit institutions, branches of foreign banks shall submit a written request to the State Bank of Vietnam for approval to grant loans in foreign currency, including the main contents:

a) Credit institutions, branches of foreign banks commit to having assessed and ensured that the project and the plan for using capital are feasible, the borrower meets all conditions for borrowing as prescribed by laws on lending activities, and has the ability to repay the principal and interest on time;

b) Credit institutions, branches of foreign banks report in detail the contents they have assessed and approved for lending to the borrower: The borrower's need for foreign currency loans to implement projects and plans for production and business activities in priority areas for promoting production and business development as stipulated in Resolutions, Decrees, Decisions, Directives and other documents of the Government,

c) Credit institutions, branches of foreign banks report in detail about the sources of foreign currency funds for lending, while committing and ensuring a balance of foreign currency funds appropriate to the term and amount of the loan; the lending activity complies with current laws on lending activities, foreign exchange management, credit limits, safety ratios in banking operations of credit institutions, and other relevant laws;

d) Credit institutions, branches of foreign banks commit to being responsible for the results of their assessment and decision to grant foreign currency loans to customers and the information provided in the request letter.

2. Procedures and formalities for approving foreign currency loans:

a) Credit institutions and overseas bank branches directly send or mail the request for approval of foreign currency loans to the State Bank of Vietnam (Department of Monetary Policy).

b) Based on the provisions in Resolutions, Decrees, Decisions, Directives and other documents of the Government,

c) Within a maximum period of thirty working days from the date of receipt of the request for approval to grant foreign currency loans from credit institutions, branches of foreign banks containing complete information as prescribed in Clause 1 of Article 4 of this Circular, the State Bank of Vietnam shall send a written notification approving or rejecting the credit institution's or branch of a foreign bank's request to grant foreign currency loans, stating the reasons for rejection.

Article 5. Currency for Repayment of Debt

1. For foreign currency loans as prescribed in Points a, c, d of Clause 1 and Clause 2 of Article 3 of this Circular where the borrower has sufficient foreign currency income to repay the loan: The borrower must repay the principal and interest of the loan in the same foreign currency borrowed; if repayment is made in a different foreign currency, it shall be carried out according to the agreement between the credit institution or branch of a foreign bank and the borrower in compliance with relevant laws. In case the borrower fails to have sufficient foreign currency from business operations or legitimate foreign currency income at maturity due to objective reasons leading to delayed payment from business operations, and such situation is confirmed in writing by the credit institution or branch of a foreign bank after review, the credit institution or branch of a foreign bank shall ensure a balance of legitimate foreign currency funds to sell to the borrower to repay the loan, and the borrower commits to selling the received foreign currency from business operations to the credit institution or branch of a foreign bank upon receipt.

2. For foreign currency loans as prescribed in Point b of Clause 1 and Clause 2 of Article 3 of this Circular where the borrower does not have or does not have sufficient legitimate foreign currency income to repay the loan: The credit institution or branch of a foreign bank shall ensure a balance of legitimate foreign currency funds to sell to the borrower to repay the principal and interest of the loan.

Article 6. Responsibilities of credit institutions and foreign bank branches

1. Credit institutions, branches of foreign banks granting loans in foreign currency in accordance with this Circular, regulations on lending, foreign exchange management, safety ratios in the operation of credit institutions, branches of foreign banks, and related laws. In case there are conflicting provisions between this Circular and other documents of the State Bank of Vietnam regarding foreign currency lending, the provisions of this Circular shall apply.

2. When implementing foreign currency lending, credit institutions and overseas bank branches must ensure a balance of foreign currency capital appropriate to the term and amount of the loan.

3. Credit institutions and foreign bank branches must ensure a balance of legitimate foreign currency capital sources to sell to customers for repayment of principal and interest on foreign currency loans in cases where borrowers do not have or do not have sufficient legitimate foreign currency revenue to repay their loans as stipulated in Article 5 of this Circular.

4. Monthly, no later than the 12th day of the month following the reporting month, credit institutions and foreign bank branches shall report to the State Bank of Vietnam on foreign currency lending according to Form 01 and Form 02 issued with this Circular.

Article 7. Implementation Organization

1. This Circular takes effect from January 1, 2015.

2. Repeal Circular No. 29/2013/TT-NHNN dated December 6, 2013, of the Governor of the State Bank of Vietnam regarding foreign currency lending by credit institutions and foreign bank branches to resident borrowers.

3. For loans that apply single disbursement methods, project investment loans, syndicated loans under credit agreements signed before the effective date of this Circular, credit institutions and foreign bank branches and borrowers shall implement the contents of the signed credit agreement in accordance with applicable laws at the time of signing the credit agreement or amend and supplement the credit agreement in compliance with this Circular. For loans that apply credit limit and revolving credit methods under credit agreements signed before the effective date of this Circular, which are disbursed from January 1, 2015 onwards, credit institutions and foreign bank branches and borrowers shall comply with the provisions of this Circular.

4. The Director of the Office, Heads of the Monetary Policy Department and Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally governed cities; Chairmen of the Board of Directors, Chairmen of the Board of Members and General Directors (Directors) of credit institutions and foreign bank branches are responsible for implementing this Circular.