What are the regulated entities applying regulations on foreign loans without the Government's guarantee in Vietnam from August 15, 2023?
From August 15, 2023, what are the conditions are foreign loans without the Government's guarantee in Vietnam?
On June 30, 2023, the Governor of the State Bank of Vietnam issued Circular 08/2023/TT-NHNN promulgates a Circular on eligibility requirements for foreign loans without the Government's guarantee.
Accordingly, Article 2 of Circular 08/2023/TT-NHNN stipulates that regulated entities applying regulations on foreign loans without the Government's guarantee include:
- Residents that are enterprises, cooperatives, cooperative unions, credit institutions and foreign bank branches (FBBs) duly established and operating in Vietnam and known as the parties applying for foreign loans (hereinafter referred to as “borrowers”).
- Credit institutions or FBBs in Vietnam where borrowers’ accounts are opened to serve their foreign borrowing and repayment of foreign loan debts (hereinafter referred to as “account service banks”).
In addition, Article 4 of Circular 08/2023/TT-NHNN also stipulates application of relevant regulations and laws apply:
- In addition to the fulfillment of eligibility requirements for foreign loans laid down in this Circular, borrowers of foreign loans in the form of issuance of international bonds must also comply with regulations of law on offering of corporate bonds in international market and other relevant law provisions.
- In addition to the fulfillment of eligibility requirements for foreign loans laid down in this Circular, borrowers that are state-owned enterprises must also comply with regulations of law on management and use of state capital invested in manufacturing and business activities of enterprises and other relevant regulations of law.
What are the regulated entities applying regulations on foreign loans without the Government's guarantee in Vietnam from August 15, 2023?
What are the rules for using foreign loan capital in Vietnam?
Pursuant to Article 6 of Circular 08/2023/TT-NHNN regulating the rules for using foreign loan capital as follows:
Rules for using foreign loan capital
1. Borrowers shall assume overall responsibility to use foreign loan capital for lawful purposes as defined in this Circular.
2. In case a foreign loan amount has been withdrawn but has not yet used for the lawful loan purposes as defined in this Circular, the borrower may deposit this loan amount at credit institutions or FBBs operating in Vietnam. Term of each deposit does not exceed 01 month.
Accordingly, when using foreign loans, it is necessary to comply with the following principles:
- Borrowers shall assume overall responsibility to use foreign loan capital for lawful purposes as defined in this Circular.
- In case a foreign loan amount has been withdrawn but has not yet used for the lawful loan purposes as defined in this Circular, the borrower may deposit this loan amount at credit institutions or FBBs operating in Vietnam. Term of each deposit does not exceed 01 month.
What are the contents of the plan for use of foreign loan capital in Vietnam?
The basic content of the plan to use foreign loans is specified in Clauses 2 and 3, Article 7 of Circular 08/2023/TT-NHNN:
- The plan for use of foreign loan capital prepared by the borrower that is a credit institution or FBB shall, inter alia, have the following contents:
+ Name of the borrower, type of the credit institution, equity capital, address, license for establishment and operation of the credit institution or license for establishment of the FBB, outstanding debts incurred from short-term, medium/long-term loans as at the planning date;
+ Business objectives, total demand for capital mobilization, and demand for foreign loan capital of the borrower;
+ Information on the foreign loan to be obtained;
+ Purposes of the foreign loan, including: information on target customers to who the borrower considers giving loans using the foreign loan capital, planned lending interest rate and loan term;
+ Foreign borrowing scale: loan amount, credit growth target, credit growth rate as at the planning date, comparison of the foreign borrowing scale with the remaining credit growth scale as at the end of the year or with the credit growth scale of the previous year in case information on credit growth target of the current year is not available;
+ Measures for management of risks arising from the foreign loan;
+ Authority to approve the plan for use of foreign loan capital: approving authority and grounds for determining approving authority;
+ Other contents (if any).
- The plan for use of foreign loan capital prepared by the borrower that is not a credit institution or FBB shall, inter alia, have the following contents:
+ The borrower’s name, business type, charter capital, address, establishment license, business registration certificate, certificate of registration of cooperative or cooperative union and its amending documents (if any) or another document of equivalent validity, and lawful business lines relevant to the purposes of the foreign loan;
+ Information on the foreign loan to be obtained;
+ Purposes and scale of the foreign loan;
++ Information on business activities, other projects to be financed by the foreign loan, which must be within the lawful scope of business of the borrower:
++ Regarding a short-term foreign loan: the statement of demands for use of the short-term foreign loan (hereinafter referred to as “capital demand statement”) which is made using the form in the Appendix enclosed herewith, and according to the rules laid down in Clause 4 of this Article.
++ Regarding a medium/long-term foreign loan: total capital for business activities; capital structure; scale of the foreign loan; expenditures to be covered using medium/long-term foreign loan;
+ Measures for management of risks arising from the foreign loan (if any);
+ Authority to approve the plan for use of foreign loan capital: approving authority and grounds for determining approving authority;
+ Other contents (if any).
Note: Circular 08/2023/TT-NHNN takes effect from August 15, 2023
LawNet
