Vietnam: What credit operations does loan syndication include? What are the procedures for arranging loan syndication by credit institutions?
What credit operations does loan syndication in Vietnam include?
According to the provisions of Clause 1, Article 2 of Circular 42/2011/TT-NHNN, the definition of loan syndication is as follows:
Interpretation
In this Circular, following terms shall be construed as follows:
1. Loan syndication means 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.
At the same time, according to Article 1 of Circular 42/2011/TT-NHNN (amended by Clause 1 Article 1 of Circular 24/2016/TT-NHNN) on scope and subject of application as follows:
Article 1. 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, loan syndication means the provision of loan syndication by two (02) credit institutions and more to investors in business projects or plans in Vietnam; and resident investors in overseas projects.
Loan syndication is carried out through the following operations:
+ Lending
+ Discount
+ Finance leasing
+ Factoring
+ Banking guarantee
+ Other credit operations.
What are the procedures for arranging loan syndication by credit institutions in Vietnam?
According to the provisions of Article 9 of Circular 42/2011/TT-NHNN as follows:
Procedures for arrangement of loan syndication
1. Based on the invitation of the credit institution that is the head member in the arrangement, the invited credit institution shall review and provide official reply in writing to the arranging credit institution as to acceptance (to state clearly the maximum amount to be contributed) or refusal of participating in the loan syndication.
2. If the number of participating credit institutions and committed credit amount of the participating credit institution has not satisfied the requirement of the project, the credit institution that acts as the head member in arrangement may issue invitation letters to other eligible institutions to participate in.
3. Based on the reply of the invited institutions, the credit institution that acts as a head in the arrangement shall consider the number of members to participate in the loan syndication and convene a meeting of members for discussing matters relating to the provision of loan syndication.
Thus, the procedures for arranging loan syndication by credit institutions in Vietnam are:
- Based on the invitation of the credit institution that is the head member in the arrangement, the invited credit institution shall review and provide official reply in writing to the arranging credit institution as to acceptance (to state clearly the maximum amount to be contributed) or refusal of participating in the loan syndication.
- If the number of participating credit institutions and committed credit amount of the participating credit institution has not satisfied the requirement of the project, the credit institution that acts as the head member in arrangement may issue invitation letters to other eligible institutions to participate in.
- Based on the reply of the invited institutions, the credit institution that acts as a head in the arrangement shall consider the number of members to participate in the loan syndication and convene a meeting of members for discussing matters relating to the provision of loan syndication.
What are the procedures for appraisal and decision on the provision of loan syndication by credit institutions in Vietnam?
Pursuant to Article 10 of Circular 42/2011/TT-NHNN on appraisal and decision on the provision of loan syndication as follows:
- Members shall agree on the form of appraisal for the project of loan syndication, ratify the appointment of representative for co-appraisal and authorize the head credit institution in the credit extension or hire an external appraiser of the third party.
- Based on the final appraisal result, the members shall consider and make a decision on the proportion of loan syndication, inform the head member in the arrangement of loan syndication and take self-responsibility for their decision.
- Appraisal expenses shall be agreed upon by the members and made in writing.
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