What is grant of syndicated loans in Vietnam? Which organizations grant syndicated loans in Vietnam?
What is grant of syndicated loans in Vietnam?
Pursuant to Article 2 of Circular No. 42/2011/TT-NHNN stipulating the grant of syndicated loans as follows:
Interpretation
In this Circular, following terms shall be construed as follows:
1. Grant of syndicated loans shall mean the provision of loan syndication by two (02) credit institutions and more to customers through the operations of lending, discount, finance leasing, factoring, banking guarantee and other credit operations.
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In addition, in Article 1 of Circular No. 42/2011/TT-NHNN (amended by Clause 1, Article 1 of Circular No. 24/2016/TT-NHNN) the scope and subject of application are as follows:
Scope and subject of application
1. This Circular specifies regulations on:
a) Grant of syndicated loans by credit institutions, branches of foreign banks and foreign credit institutions to investors in business projects or plans (hereinafter referred to as “project”) in Vietnam and resident investors in overseas projects;
b) Grant of syndicated loans to non-resident investors in overseas projects by those other than foreign credit institutions.
2. In case syndicated loans are granted to non-resident investors in overseas projects by a group of lenders including foreign credit institution(s), the Vietnamese and foreign credit institutions shall come to an agreement which is conformable to regulations on foreign exchange management.
Thus, grant of syndicated loans shall mean the provision of loan syndication by two credit institutions and more to customers through the operations of lending, discount, finance leasing, factoring, banking guarantee and other credit operations.
The grant of syndicated loans is applicable to investors in business projects or plans and resident investors in overseas projects.
What is grant of syndicated loans in Vietnam? Which organizations grant syndicated loans in Vietnam?
Which organizations grant syndicated loans in Vietnam?
According to the provisions of Clause 2, Article 2 of Circular No. 42/2011/TT-NHNN (amended by Clause 2, Article 1 of Circular No. 24/2016/TT-NHNN) on the lenders of syndicated loans specifically as follows:
Interpretation
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2. Lenders of syndicated loans are commercial banks, cooperative banks, people’s credit funds, financial companies, finance lease companies, branches of foreign banks and foreign credit institutions (hereinafter referred to as “credit institution”) that undertake to grant syndicated loans to clients for implementation of whole or part of a project.
Thus, organizations providing syndicated loans include:
+ Commercial banks
+ Cooperative banks
+ People's Credit Funds
+ Financial companies
+ Finance lease companies
+ Branches of foreign banks
+ Foreign credit institutions
According to the provisions of Article 5 of Circular No. 42/2011/TT-NHNN, an organization shall grant syndicated loans in one of the following cases:
- Demand for credit for realization of project of the customer exceeds the credit limit of the credit institution as prescribed by applicable laws.
- Financial capacity and fund resources of the credit institution cannot meet the credit demand of the project.
- The credit institution has a demand for dispersing risks.
- The customer has a demand for credit from various credit institutions for the purpose of the project.
- Credit institutions provide loan syndication to key projects under the direction of the Government.
What conditions must a credit institution meet to participate in grant of syndicated loans in Vietnam?
According to the provisions of Article 7 of Circular No. 42/2011/TT-NHNN (amended and supplemented by Clause 5, Article 1 of Circular No. 24/2016/TT-NHNN), a credit institution can participate in the grant of syndicated loans where following conditions are fully satisfied:
For the member that is a credit institution:
- To be established and operate in accordance with the Law on Credit institutions;
- To comply with prudential ratios after signing syndication contract, credit contract;
- Not to break limits on credit extension as provided for in the Law on Credit institutions (including outstanding of loan syndication to the customer in which the credit institution, foreign bank's branch expect to participate).
For the member that is a foreign credit institution:
- To be established in accordance with laws of a foreign country.
- To comply with regulations on loan syndication in line with this Circular, regulations on investment, lending, foreign exchange control and other applicable regulations.
However, for the case where the loan syndication has the participation of foreign credit institutions, the customer shall be required to register for foreign loan; open and use an account of foreign loan and debt repayment and observe provisions of laws relating to foreign loan and debt repayment.
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