Vietnam: What are the responsibilities of credit institutions applying for a medium/long-term foreign loan without Government's guarantee in the form of issuance of bonds in the international market?
- What is the limit on short-term foreign loans without Government's guarantee for credit institutions in Vietnam?
- What are the responsibilities of credit institutions in Vietnam applying for a medium/long-term foreign loan without Government's guarantee in the form of issuance of bonds in the international market?
- Vietnam: What are the responsibilities of borrowers of foreign loan without Government's guarantee?
What is the limit on short-term foreign loans without Government's guarantee for credit institutions in Vietnam?
Pursuant to Article 15 of Circular 08/2023/TT-NHNN stipulates as follows:
Limit on short-term foreign loans
A borrower may apply for a short-term foreign loan if it meets the limit on short-term foreign loans as at December 31 of the year preceding the year in which the loan application is submitted. The limit on short-term foreign loans is the maximum ratio of total outstanding principal of short-term foreign loans to standalone equity, and shall not exceed:
1. 30% if the borrower is a commercial bank; or
2. 150% if the borrower is a FBB or another credit institution.
Accordingly, the limit on short-term foreign loans is the maximum ratio of total outstanding principal of short-term foreign loans to standalone equity, and shall not exceed:
- 30% if the borrower is a commercial bank; or
- 150% if the borrower is a FBB or another credit institution.
What are the responsibilities of credit institutions in Vietnam applying for a medium/long-term foreign loan without Government's guarantee in the form of issuance of bonds in the international market?
Pursuant to the provisions in Point b, Article 16 of Circular 08/2023/TT-NHNN, the regulations are as follows:
Prudential ratios
1. When applying for a short-term foreign loan, the borrower shall be required to achieve the minimum levels of prudential ratios prescribed in the Law on Credit Institutions on the last day of each of the last 03 months prior to the signing date of the foreign loan agreement or agreement on increase in the foreign loan amount, except the case in Point c Clause 2 of this Article.
2. When applying for a medium/long-term foreign loan, the borrower shall be required to achieve the minimum levels of prudential ratios prescribed in the Law on Credit Institutions on the last day of each of the last 03 months prior to the signing date of the foreign loan agreement or agreement on increase in the foreign loan amount until the end of the month prior to the month in which an adequate application for administrative procedure processing is submitted as prescribed in current law regulations on management of foreign currency for foreign borrowing and debt repayment, except the following cases:
a) The medium/long-term foreign loan is eligible to be accounted for in tier-2 capital of the credit institution or FBB and will help the credit institution or FBB achieve the required levels of prudential ratios;
b) The borrower that gets a foreign loan in the form of issuance of bonds in the international market shall be required to achieve the minimum levels of prudential ratios imposed by the SBV in accordance with the Law on Credit Institutions on the last day of each of the last 03 months prior to the date of submission of an application for bond issuance registration;
c) The borrower that is an assisting credit institution under an approved recovery plan or a assisting credit institution placed under special control shall be required to achieve specific levels of prudential ratios imposed on them as prescribed in the Law on Credit Institutions.
Thus, based on the above regulations, the borrower that gets a foreign loan in the form of issuance of bonds in the international market shall be required to achieve the minimum levels of prudential ratios imposed by the SBV in accordance with the Law on Credit Institutions on the last day of each of the last 03 months prior to the date of submission of an application for bond issuance registration.
Vietnam: What are the responsibilities of credit institutions applying for a medium/long-term foreign loan without Government's guarantee in the form of issuance of bonds in the international market? (Picture from internet)
Vietnam: What are the responsibilities of borrowers of foreign loan without Government's guarantee?
Pursuant to the provisions of Article 19 of Circular 08/2023/TT-NHNN, regulations on responsibilities of borrower which is not guaranteed by the government have the following responsibilities:
- Comply with eligibility requirements for foreign loans laid down in this Circular and relevant law regulations on foreign exchange management.
- Comply with regulations of the civil code, laws on enterprises, investment, secured transactions, and anti-money laundering, specialized laws, relevant laws and international practices when entering into foreign loan agreements and getting foreign loans.
- Assume legal responsibility for the accuracy and truthfulness of documents proving purposes of the foreign loan, and use foreign loan capital for the purposes defined in such documents as prescribed in Clause 2 Article 14 and Clause 4 Article 17 of Circular 08/2023/TT-NHNN.
- Retain adequate documents proving the borrower’s use of the foreign loan capital for proper purposes as prescribed in Article 14 and Article 17 of Circular 08/2023/TT-NHNN, documents on changes in the capital demand statement (if any) as prescribed in Clause 4 Article 7 of this Circular, and present them to serve competent authorities’ inspection of use of foreign loan capital.
- Keep record of each idle amount of money in case the borrower makes term deposits at credit institutions and FBBs according to the rules for using foreign loan capital in Article 6 of Circular 08/2023/TT-NHNN, and present it together with the documents proving the borrower’s compliance with Article 6 of Circular 08/2023/TT-NHNN to serve competent authorities’ inspection of use of foreign loan capital, when required.
Regulations on short-term foreign borrowing limits specified in Article 15 of Circular 08/2023/TT-NHNN take effect from January 1, 2024.
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