Can guarantee certificate of credit guarantee fund cease to be effective on its own in Vietnam?
Can guarantee certificate of credit guarantee fund cease to be effective on its own in Vietnam? How much is building up guarantee loss reserves per year in Vietnam?
My business has signed a guarantee contract with the credit guarantee fund and has been issued a guarantee certificate, but it has been more than 3 months since our business has not received any disbursement from the lender. can it automatically expire?
1. Can guarantee certificate of credit guarantee fund cease to be effective on its own in Vietnam?
Pursuant to Article 35 of Decree 34/2018/ND-CP stipulating termination of obligations to guarantee loans as follows:
The guarantor’s obligations to guarantee loans shall be terminated in the following cases:
1. The obligor has fulfilled their obligations to make a full payment on debts to the obligee under the credit contract.
2. The guarantor has discharged their guarantee obligations as agreed upon with the obligee in the credit guarantee contract or guarantee certificate.
3. The loan guarantee shall be cancelled or replaced by other guarantee methods if the mutual agreement entered into by interested parties is reached.
4. Within 60 days from the issuance of guarantee certificate, if there is no amount of disbursement from the obligee to the obligor, the guarantee certificate shall cease to be effective.
5. The term of loan guarantee has expired.
6. The obligee has agreed to exempt the guarantor from fulfilling their guarantee obligations, or the guarantee obligations have been terminated in accordance with laws.
7. Pursuant to the agreement signed by contracting parties in compliance with laws.
Thus, the above case has passed the 60-day time limit without disbursement from the obligee to the obligor, the party that has been granted a guarantee certificate, the certificate shall cease to be effective according to regulations in Vietnam.
2. How much is building up guarantee loss reserves per year in Vietnam?
According to the provisions of Article 36 of Decree 34/2018/ND-CP stipulating debt classification, building up guarantee loss reserves as follows:
1. Debt classification: The credit guarantee fund shall classify debts that have been repaid on behalf of the obligor (the obligor is forced to be indebted) as prescribed by the State bank of Vietnam.
2. Building up guarantee loss reserves: The credit guarantee fund may build up the guarantee loss reserves and have them deducted from the operational costs as follows:
a) Build up an annual general guarantee loss reserve equal to 0.75% of its guarantee balance;
b) Build up particular guarantee loss reserves: According to the debt classification and annual revenues and expenditures, the credit guarantee fund shall build up particular guarantee loss reserves for debts that have been repaid on behalf of the obligor, the rate of reserve may not exceed the maximum reserve rates by debt groups applied to credit institutions.
3. The credit guarantee fund shall be entitled to use the guarantee loss reserves to cover debts arising from guarantee obligations which cannot be recovered after using risk insurance (if any). At the end of the year, if the balance of the guarantee loss reserve remains positive, it will be carried forward to the following year for further use.
If the guarantee loss reserve is not enough to cover guarantee risks arising in that year, the financial reserve fund shall be taken as prescribed in Article 43 of this Decree.
According to this Article, every year the Credit Guarantee Fund will make a annual general guarantee loss reserve equal to 0.75% of its guarantee balance in Vietnam.
Best Regards!
