From August 15, 2023, when will credit institutions apply for a short-term foreign loan without the Government's guarantee in Vietnam?
- What are the loan purposes of credit institutions in Vietnam?
- What regulations must credit institutions comply with when applying for a short-term foreign loan in Vietnam?
- From August 15, 2023, when will credit institutions apply for a short-term foreign loan without the Government's guarantee in Vietnam?
What are the loan purposes of credit institutions in Vietnam?
Pursuant to Article 14 of Circular 08/2023/TT-NHNN stipulates as follows:
Loan purposes
1. Short-term and medium/long-term foreign loans are used for:
a) increasing the borrower’s funding for credit extension activities to meet its credit growth target;
b) restructuring the borrower’s foreign debts;
2. When applying for a medium/long-term foreign loan, the borrower shall be required to prove its loan purposes by presenting:
a) The plan for use of foreign loan capital as prescribed in Clause 2 Article 7 of this Circular if the loan is used for the purpose defined in Point a Clause 1 of this Article; or
b) The debt restructuring plan as prescribed in Article 8 of this Circular if the loan is used for the purpose defined in Point b Clause 1 of this Article.
Accordingly, short-term and medium/long-term foreign loans are used for:
- increasing the borrower’s funding for credit extension activities to meet its credit growth target;
- restructuring the borrower’s foreign debts;
When applying for a medium/long-term foreign loan, the borrower shall be required to prove its loan purposes by presenting:
- The plan for use of foreign loan capital as prescribed in Clause 2 Article 7 of Circular 08/2023/TT-NHNN if the loan is used for the purpose defined in Point a Clause 1 of Article 14, Circular 08/2023/TT-NHNN; or
- The debt restructuring plan as prescribed in Article 8 of this Circular if the loan is used for the purpose defined in Point b Clause 1 of Article 14, Circular 08/2023/TT-NHNN.
From August 15, 2023, when will credit institutions apply for a short-term foreign loan without the Government's guarantee in Vietnam?
What regulations must credit institutions comply with when applying for a short-term foreign loan in Vietnam?
Pursuant to Clause 1, Article 16 of Circular 08/2023/TT-NHNN stipulates 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, 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 Article 16 of Circular 08/2023/TT-NHNN.
From August 15, 2023, when will credit institutions apply for a short-term foreign loan without the Government's guarantee 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, from August 15, 2023, 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. .
Circular 08/2023/TT-NHNN takes effect from August 15, 2023.
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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