When a credit institution cannot meet the credit granting needs of an investment project, is it possible to syndicate with another organization?
- When a credit institution cannot meet the loan syndication needs of an investment project, is it possible to syndicate with another organization?
- What principles should credit institutions comply with when granting syndicated credit?
- Does the granting of syndicated credit between credit institutions take place only after appraising the funding application?
When a credit institution cannot meet the loan syndication needs of an investment project, is it possible to syndicate with another organization?
According to the provisions of Article 5 of Circular 42/2011/TT-NHNN of Vietnam, cases where loan syndication is applied are as follows:
Cases where loan syndication is applied
1. Demand for credit for realization of projects of the customer exceeds the credit limit of the credit institution as prescribed by applicable laws.
2. Financial capacity and fund resources of the credit institution cannot meet the credit demand of the project.
3. The credit institution has a demand for dispersing risks.
4. The customer has a demand for credit from various credit institutions for the purpose of the project.
5. Credit institutions provide loan syndication to key projects under the direction of the Prime Minister.
Thus, when credit institutions do not have enough financial capacity and capital to provide credit for investment projects, they will apply loan syndication.
When a credit institution cannot meet the credit granting needs of an investment project, is it possible to syndicate with another organization?
What principles should credit institutions comply with when granting syndicated credit?
Pursuant to Article 3 of Circular 42/2011/TT-NHNN of Vietnam (amended by Clause 3, Article 1 of Circular 24/2016/TT-NHNN and supplemented by Clause 4, Article 1 of Circular 24/2016/TT-NHNN), when applying for a loan syndication in Vietnam, the following rules must be adhered to:
- The provision of loan syndication is performed on the basis of the voluntary participation of members, in the principle of co-appraisal, co-deciding to extend credit to the customer and joint responsibility for the result of the credit extension.
- Syndicate members shall make capital (or obligations) contribution according to the proportion set forth in the capital syndication contract, receive shared interests and fees and share expenses and risks incurred as stipulated in the capital syndication contract. Fees for granting syndicated loans shall be agreed upon between lenders and clients under current Vietnam’s regulations of laws.
- A lead lender may play the role as the member taking charge of arrangement of syndicated loans, payment or custody of pledged assets. Such lead lenders shall be appointed by other members in accordance with Vietnam’s regulations of laws. Foreign credit institutions participating in syndicated loans shall not be entitled to assume a role as the member taking charge of payment activities.
- Members shall be responsible for performing the assigned duties and receive compensation from the performance of duties that are authorized by other members.
- The loan syndication for a specific operation shall be based on provisions of this Circular and regulations applicable to such specific operation.
- Syndicate members other than foreign credit institutions shall comply with prudential limits and ratios for syndicated loans prescribed by the State Bank
Does the granting of syndicated credit between credit institutions take place only after appraising the funding application?
According to the provisions in Article 8 of Circular 42/2011/TT-NHNN of Vietnam (amended by Clause 6, Article 1 of Circular 24/2016/TT-NHNN of Vietnam) as follows:
Proposal for loan syndication in Vietnam
1. After receiving the application file for credit of the customer, the credit institution shall proceed with appraising the file, the feasibility and application for credit of the customer.
2. Where it is necessary to offer syndicated loans, credit institutions shall send invitation to participate in syndicated loans and relevant documents attached thereto to those that are expected to participate in syndicated loans.
Thus, the granting of syndicated credit between credits takes place when the credit institution conducts preliminary appraisal of the customer's application, feasibility and credit request.
Then, when it is deemed necessary to offer syndicated loans, credit institutions shall send invitation to participate in syndicated loans and relevant documents attached thereto to those that are expected to participate in syndicated loans.
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