Circular No. 45/2011/TT-NHNN on foreign exchange management for lending and debt recovery abroad by credit institutions

CIRCULAR

Regulations on foreign exchange management for lending and debt recovery abroad by credit institutions

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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 Organizations No. 47/2010/QH12 dated June 16, 2010;

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

Pursuant to 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;

The State Bank of Vietnam (hereinafter referred to as the State Bank) shall stipulate regulations on foreign exchange management for lending and debt recovery abroad by credit institutions as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

1. This Circular stipulates foreign exchange management for lending and debt recovery abroad by credit institutions.

2. The objects subject to this Circular are organizations and individuals related to the activities of lending and debt recovery abroad by credit institutions.

Article 2. Interpretation of Terms

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

1. Lending abroad means the act of a credit institution transferring or committing to transfer a sum of money to a non-resident customer (hereinafter referred to as the foreign borrower) for use for a specific purpose within a certain period according to an agreement with the principle of repayment of both principal and interest.

2. Loan agreement is a binding agreement between a credit institution and a foreign borrower that specifies the terms and conditions of the loan abroad regarding the purpose of using the borrowed funds, the method of lending, the amount of the loan, the interest rate, the term, the repayment schedule, the content of the loan guarantee, the repayment method, and other relevant commitments.

3. Amendment agreement is an agreement between a credit institution and a foreign borrower regarding additional or amended content of the loan agreement already signed. An amendment agreement may take the form of a new agreement or an appendix to the previously signed loan agreement.

4. Registration of loan, registration of loan amendment is the act of a credit institution registering with the State Bank about the loan abroad or changes to the loan abroad according to the provisions of this Circular.

5. Confirmation of registration is a document issued by the State Bank confirming that a credit institution has registered the loan abroad according to the provisions of this Circular.

6. Confirmation of registration amendment is a document issued by the State Bank confirming that a credit institution has registered the amendment to the loan abroad when changing contents already confirmed by the State Bank in the confirmation of registration document.

7. Foreign lending and debt recovery account is a foreign currency account used to implement the loan abroad.

Article 3. Responsibilities of credit organizations

1. To assess the legal capacity and financial capacity of the foreign borrower; the ability to fulfill the loan agreement to ensure the recovery of principal and interest according to the loan agreement.

2. To bear the legal and financial risks associated with signing and implementing the loan agreement.

3. To comply with current laws and regulations on foreign exchange management, lending and debt recovery abroad, credit institution's lending rules for customers, ensuring the loan abroad, and other relevant laws of Vietnam and foreign countries in signing and implementing the loan agreement.

4. To establish a credit assessment process, risk management and prevention procedures for lending and debt recovery abroad in accordance with current relevant laws.

Article 4. Lending in syndicated loans abroad

1. When participating in lending in syndicated loans abroad, credit institutions must comply with the provisions of this Circular and other relevant laws.

2. In cases where one credit institution participates with other lenders who are non-residents to implement a syndicated loan abroad, the credit institution shall implement the provisions on registering the loan, registering changes to the loan with the State Bank, opening and using the loan account, recovering foreign debts, and reporting according to the provisions of this Circular for the portion of participation in syndicated loans abroad.

3. In cases where two or more credit institutions participate in implementing a syndicated loan abroad, the credit institutions shall uniformly authorize one credit institution as the lead. The lead credit institution shall be responsible for representing the credit institutions providing syndicated loans in implementing the provisions on registering the loan, registering changes to the loan with the State Bank, opening and using the loan account, recovering foreign debts, and reporting according to the provisions of this Circular.

Article 5. Currency for lending abroad

1. Credit institutions' lending and recovery of foreign debts shall be conducted in foreign currency.

2. Cases where credit institutions lend and recover foreign debts in Vietnamese dong may only be implemented upon written approval from the State Bank.

Article 6. Guaranteeing a loan abroad

In cases where a loan abroad is guaranteed by a guarantee organization in Vietnam, the performance of the guarantee obligation must comply with the relevant laws.

Chapter II

SPECIFIC PROVISIONS

Article 7. Conditions for lending abroad

Credit institutions must meet the following conditions when implementing lending abroad:

1. Being a credit institution permitted by the State Bank to operate and provide foreign exchange services on the international market including international lending activities.

2. Complying with the current regulations of the State Bank regarding credit growth ratios and safety ratios in the operations of credit institutions.

3. Having a loan approval process that ensures independence and clearly defines individual responsibilities and responsibilities between the appraisal stage and the decision-making stage for lending abroad.

4. Implementing loan classification, provisioning for credit risk for foreign loans according to the current regulations of the State Bank on loan classification, provisioning, and utilization for credit risk management in banking operations of credit institutions.

5. Conducting project appraisals, national risk assessments, and evaluations of the ability to recover principal and interest of foreign loans comprehensively and within deadlines.

6. Having a plan for raising and lending foreign currencies ensuring principles of compatibility in currency structure and term structure between raising and lending, avoiding term risk and liquidity risk that may arise from implementing foreign loans.

7. Only lending abroad for projects and business plans that align with the lawful scope of activities of the foreign borrower.

8. Ensuring that the terms of the loan agreement and related agreements concerning foreign loans do not contravene current Vietnamese laws.

Article 8. Foreign Borrowers

1. Credit institutions shall only provide loans to foreign borrowers that are enterprises established and operating abroad with capital contributions from Vietnamese enterprises in the form of direct investment abroad.

2. Other cases shall only be implemented upon written approval from the State Bank.

Article 9. Registration of Loan Amounts, Registration of Changes to Loan Amounts

1. Based on meeting the conditions for providing overseas loans as stipulated in this Circular, credit institutions shall sign loan agreements, and agreements to change loans with foreign borrowers and other related parties.

2. Credit institutions shall register loan amounts, and changes to loan amounts with the State Bank within thirty (30) days from the date of signing the loan agreement or the agreement to change (in case the loan is not guaranteed), or within thirty (30) days from the date the guarantor organization signs the guarantee document or the document agreeing to the content of the loan agreement change (in case the loan is guaranteed).

3. All transactions related to overseas loans shall only be carried out after the credit institution has been confirmed by the State Bank regarding registration and registration of changes according to the provisions of this Circular.

4. Credit institutions are not required to register with the State Bank loan agreements that are not effective for withdrawing funds such as: Framework Credit Agreements, Memorandums of Understanding, and similar agreements, but the contents of these agreements must not contravene Vietnamese laws.

Article 10. Documents for registering a loan

The credit institution shall directly send or send via postal service one (1) set of loan registration documents to the State Bank (Department of Foreign Exchange Management). The documents include:

1. Application for registering an overseas loan (Annex No. 01 issued together with this Circular).

2. Report on the credit growth situation of the credit institution, proving compliance with safety ratios at the end of the nearest month prior to the signing of the loan agreement, and assessing the impact of the overseas loan on compliance with credit growth ratio regulations and safety ratios in the operation of the credit institution.

3. Report on the assessment of overseas loans including the following main contents: evaluation of the feasibility and effectiveness of the investment project, business plan of the foreign borrower; related risks, ability to recover principal and interest fully and on time; appropriateness of the loan amount and scale of the project using borrowed funds; issues concerning collateral for the loan and other related matters.

4. Report and commitment of the credit institution regarding compliance with the conditions for overseas lending stipulated in Clause 3 and Clause 4 of Article 7 of this Circular, including the following main contents: regulations on credit procedures for overseas lending activities of the credit institution; current status of credit staff qualifications, management capabilities, risk prevention; implementation of loan classification, provision setting for overseas loans; commitment to comply with current State Bank regulations on loan classification, provision setting, and usage for handling credit risks of overseas loans.

5. Report on foreign currency sources for loans including contents related to the scale, currency structure, and term structure between foreign currency mobilization and lending at the time of signing the loan agreement.

6. Certified copy and certified Vietnamese translation of the decision on establishment or investment certificate of the foreign borrower according to the regulations of the host country.

7. Certified copy of the foreign investment certificate of the Vietnamese enterprise participating in the capital contribution of the foreign borrower.

8. Certified copy and certified Vietnamese translation (with confirmation by an authorized representative of the credit institution) of the signed loan agreement.

9. Certified copy and certified Vietnamese translation (with confirmation by an authorized representative of the credit institution) of documents and agreements guaranteeing and securing overseas loans.

Article 11. Documents for Registration of Changes to Foreign Loan Agreements

Credit institutions shall directly submit or send via postal service one set of documents for registration of changes to foreign loan agreements to the State Bank of Vietnam (Department of Foreign Exchange Management). The documents include:

1. Application for registration of changes to foreign loan agreements (Annex No. 02 issued together with this Circular).

2. A copy and Vietnamese translation (certified by an authorized representative of the credit institution) of the agreement on changes that has been signed. In cases where the contents of the changes have already been agreed upon in the original loan agreement or accepted according to the law without requiring a formal written agreement between the parties, the credit institution must provide an explanatory document clarifying these contents in the application for registration of changes to the foreign loan agreement.

3. Report proving compliance with the regulations on credit growth ratio and safety ratios at the end of the most recent month prior to signing the agreement on changing the foreign loan (in cases of increasing the amount or extending the term of the foreign loan).

4. A copy and Vietnamese translation (certified by an authorized representative of the credit institution) of the approval document from the guarantor organization regarding the agreement on changes (in cases where the foreign loan is guaranteed).

Article 12. Basis for Considering and Confirming Registration, Confirmation of Changes to Registration

The State Bank of Vietnam will consider and confirm the registration and confirmation of changes to foreign loan agreements of credit institutions based on:

1. The state's foreign exchange management policy during each period.

2. The completeness and validity of the documents for registration of loans and changes to loan registrations.

3. Compliance and full satisfaction of the provisions on foreign lending stipulated in this Circular, the credit institution’s lending regulations with customers, and other relevant laws.

4. Opinions of related agencies concerning the foreign lending of credit institutions when necessary.

Article 13. Timeframe for Processing Applications for Registration of Loans and Changes to Loan Registrations

1. The State Bank of Vietnam will process applications for registration of loans and changes to loan registrations submitted by credit institutions within thirty days from the date of receipt of complete and valid documents. If rejected, the State Bank of Vietnam will issue a document clearly stating the reasons.

2. In cases where additional information or conditions are required to have sufficient grounds for confirming or rejecting the registration or confirmation of changes to registration, the State Bank of Vietnam will notify the credit institution in writing within ten working days from the date of receipt of the credit institution's documents.

Article 14. Overseas Loan Account and Debt Recovery

1. Each foreign loan implemented by a credit institution must be conducted through one foreign loan and debt recovery account opened at the credit institution itself or another credit institution. The credit institution must conduct all disbursement transactions of the loan and debt recovery (principal, interest, and fees...) through this account.

2. In cases where the foreign loan and debt recovery account is opened at the credit institution itself to implement the foreign loan, the credit institution is responsible for recording and monitoring separately all transactions related to the foreign loan on the foreign loan and debt recovery account; it bears responsibility and ensures that all transactions related to the foreign loan are carried out in accordance with the confirmed registration and confirmation of changes by the State Bank of Vietnam.

3. In cases where the foreign loan and debt recovery account is opened at another credit institution to implement the foreign loan, the credit institution where the account is opened is responsible for verifying and reconciling the documents presented by the borrower to ensure that the transactions of the foreign loan are carried out in accordance with the confirmed registration and confirmation of changes by the State Bank of Vietnam and comply with current legal regulations.

4. The use of foreign currency accounts opened abroad by credit institutions for foreign lending and debt recovery shall be carried out in accordance with current regulations on opening and using foreign currency accounts abroad by credit institutions.

Article 15. Reporting System

1. Monthly (no later than the 10th day of the following month) and annually (no later than January 31 of the following year), credit institutions are responsible for reporting the implementation status of foreign loans (according to Annex No. 03 and Annex No. 04 issued together with this Circular).

2. In exceptional cases, credit institutions will report as required by the State Bank of Vietnam.

Chapter III

IMPLEMENTATION

Article 16. Assignment of Tasks and Coordination Mechanism

1. The Foreign Exchange Management Department:

a) Shall take the lead and coordinate with relevant units under the State Bank to handle common issues related to foreign loans granted by credit institutions in accordance with current laws.

b) Shall compile opinions from the Banking Inspection and Supervision Agency and other units under the State Bank, and other relevant agencies (if necessary), and report to the Governor of the State Bank for decision on confirming or refusing to confirm registration or changes to registration as prescribed in this Circular.

c) Shall compile periodic six-month data and report to the Governor of the State Bank on the situation of foreign loans and debt recovery by credit institutions.

2. Banking Inspection and Supervision Authority:

a) Within ten working days from the date of receiving the request from the Foreign Exchange Management Department to provide comments on foreign loans, the Banking Inspection and Supervision Agency shall send a document to the Foreign Exchange Management Department regarding the contents related to foreign loans granted by credit institutions. The content of the document includes: confirmation of the scope of business and provision of foreign exchange services by credit institutions; confirmation that credit institutions ensure compliance with current State Bank regulations on safety ratios in their operations, and regulations on the use of short-term mobilized capital for medium- and long-term loans at the end of the month prior to the loan agreement signing or change agreement in cases where changes increase the amount or term of foreign loans.

b) Shall take the lead and coordinate with relevant units to conduct inspections, audits, and supervision of foreign lending and debt recovery activities by credit institutions; and handle violations arising therefrom.

3. Other units under the State Bank, within their functions, tasks, and management scope, shall be responsible for coordinating and providing comments on loan registration files and changes to loan registrations by credit institutions if necessary.

Article 17. Implementation Provisions

1. This Circular takes effect from February 13, 2012.

2. Foreign loans granted by credit institutions before this Circular takes effect shall continue to be implemented according to the registration confirmation, and changes to registration confirmation (if any) issued by the State Bank. In cases where there are changes agreed upon after this Circular takes effect, credit institutions shall implement in accordance with the provisions of this Circular.

Article 18. Implementation Organization

The Director of the Office, Heads of the Foreign Exchange Management Department, Heads of the Banking Inspection and Supervision Agency, Heads of units under the State Bank, Governors of State Bank Branches in provinces and centrally-administered cities, Chairmen of the Board of Directors, General Managers (Directors) of credit institutions are responsible for implementing this Circular./.