What are the contents of the loan trust agreement of foreign bank branches with commercial banks in Vietnam?
Can foreign bank branches entrust loans to Vietnamese commercial banks?
Pursuant to Article 11 of Circular 30/2014/TT-NHNN of Vietnam stipulating the subjects to whom foreign bank branches can offer the loan trusteeship as follows:
Offer and acceptance of trusteeship to/from foreign bank branches
1. Foreign bank branches shall be entitled to offer the trusteeship to:
a) Other commercial banks, foreign bank branches, financial companies for the purpose of granting loans to clients;
b) Cooperative banks for the purpose of granting loans to clients who are not members of cooperative banks;
c) People's credit funds for the purpose of granting loans to clients who are not members of people's credit funds;
d) Microfinance institutions for the purpose of granting loans to individuals, family households that earn low income, and super-small enterprises;
dd) Other commercial banks, foreign bank branches, organizations permitted to trade securities by laws for the purpose of purchasing corporate bonds.
2. Foreign bank branches shall be entitled to accept the trusteeship from:
a) Parent banks, other branches of parent banks, commercial banks, banks for social policies, other foreign bank branches, cooperative banks and organizations for the purpose of granting loans to clients;
b) Parent banks, other branches of parent banks, commercial banks, foreign bank branches and organizations permitted to trade securities by laws for the purpose of purchasing corporate bonds.
Thus, foreign bank branches can entrust loans to commercial banks to make loans to customers.
In addition to commercial banks, foreign bank branches can also entrust loans to customers who are not members of people's credit funds through people's credit funds.
What are the contents of the loan trust agreement of foreign bank branches with commercial banks in Vietnam?
What are the contents of the loan trust agreement of foreign bank branches with commercial banks in Vietnam?
According to Article 5 of Circular 30/2014/TT-NHNN of Vietnam, the trust agreement has the following contents:
- Name and address of the trustor and trustee;
- Trust beneficiary: Provision of real name or accurate information that helps identify the trust beneficiary must be closely regulated.
- Fiduciary purpose;
- Fiduciary scope, terms and conditions;
- Trust term;
- Fiduciary fee;
- Trust property; the time of transferring the trust property;
- Agreed currencies used for the trust (if any);
- Rights and obligations of the trustor and trustee, which must clearly mandate that the trustor shall take all risks and be entitled to the benefit or interest of the trust, and the trustee shall be entitled to trust fees;
- Premature contract termination;
- Dispute settlement.
- The trust agreement can enclose other information agreed by contracting parties in conformity with regulations laid down in this Circular and relevant laws.
What principles should foreign bank branches adhere to in order to entrust loans at credit institutions in Vietnam?
Pursuant to Article 4 of Circular 30/2014/TT-NHNN of Vietnam (supplemented by Clause 1, Article 1 of Circular 14/2016/TT-NHNN of Vietnam), the principles for entrustment are as follows:
Trust principles
1. The trust must be established in writing and must conform to provisions enshrined in this Circular and other relevant laws.
2. The trustor shall be only entitled to form a fiduciary relationship with the trustee in which the trustor is allowed to offer the trusteeship in accordance with laws; the trustee shall be only entitled to form a fiduciary relationship with the trustor in which the trustee is allowed to accept the trusteeship in accordance with laws.
3. The trustee shall not be permitted to delegate the trusteeship to the third party.
4. The distribution of trust property must be aligned with the progress in performing fiduciary duties.
5. The trustee shall not be permitted to misuse the trust property and breach their contractual fiduciary duties as agreed upon in the trust agreement.
6. Credit institutions and foreign bank branches that place trust in other credit institutions, foreign bank branches and organizations must compute the balance of entrusted accounts identified within the safety limits and ratios for transactions performed by credit institutions and foreign bank branches in accordance with regulations laid down by the State Bank.
7. Foreign bank branches shall be entrusted by the parent banks or bank branches in host countries with the grant of loans and purchase of bonds in accordance with regulations laid down in this Circular and laws on foreign loan, debt repayment, exchange management as well as other relevant laws.
8. Entrusted assets in foreign currencies must conform to the legal regulations on foreign exchange management and other relevant laws.
9. Credit institutions and foreign bank branches being trustors must carry out the debt classification and set aside contingency funds for risk management in accordance with the State Bank’s regulations on the balance of the trustor’s assets held in trust.
Credit institutions and foreign bank branches being trustees shall not be required to carry out the debt classification and set aside contingency funds for risk management in accordance with the State Bank’s regulations on the balance of the trustee’s assets held in trust.
10. With regard to the outward entrustment, credit institutions and foreign bank branches shall be only entitled to entrust banks and fund management companies in overseas countries with the performance of several transactions stipulated in Clause 1 Article 1 hereof within the scope of permitted operations of credit institutions and foreign bank branches pertaining to the foreign exchange that occurs on the international market, as prescribed in the State Bank’s regulations.
11. Credit institutions, foreign bank branches that receive entrusted capital from organizations and individuals to invest in production, business, financial leasing, and lending projects must be secured at the time of entrustment, the entrusting party is an organization or individual that has no outstanding loans at credit institutions, foreign bank branches.
Thus, in lending entrustment activities, foreign bank branches need to adhere to the following principles:
- Credit institutions and foreign bank branches that place trust in other credit institutions, foreign bank branches and organizations must compute the balance of entrusted accounts identified within the safety limits and ratios for transactions performed by credit institutions and foreign bank branches in accordance with regulations laid down by the State Bank.
- Credit institutions and foreign bank branches being trustors must carry out the debt classification and set aside contingency funds for risk management in accordance with the State Bank’s regulations on the balance of the trustor’s assets held in trust.
- With regard to the outward entrustment, credit institutions and foreign bank branches shall be only entitled to entrust banks and fund management companies in overseas countries with the performance of several transactions within the scope of permitted operations of credit institutions and foreign bank branches pertaining to the foreign exchange that occurs on the international market, as prescribed in the State Bank’s regulations.
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