What are responsibilities of the State Bank branches regarding foreign conventional loans in Vietnam?

What are responsibilities of the State Bank branches regarding foreign conventional loans in Vietnam?

Pursuant to Article 48 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating responsibilities of the State Bank branches regarding foreign conventional loans in Vietnam as follows:

1. Implement functions or duties under authority stipulated by this Circular.

2. Take responsibility to guide, oversee, remind and encourage borrowers to declare information declaration, and make reports in accordance with provisions laid down in this Circular.

3. Make best use of the database of foreign borrowing and foreign debt repayment within its delegated authority which assists administration of foreign borrowing or foreign debt repayment on its territory of operation in consistency with its functions and duties.

4. Provide opinions from supervision of the compliance with the law on prudential ratios in banking operations by the borrower being a credit institution or foreign bank branch (under the State Bank branch’s authority to inspect and supervise micro-safety when receiving an advisory opinion request from the competent authority). The scope of supervision opinions includes opinions on individual indicators and consolidated indicators of ratios and limits reported by credit institutions and foreign bank branches in Appendix 02 appended to this Circular;

5. Inspect, examine and impose penalties for administrative violations within its jurisdiction in respect of cases of administrative violations in the course of implementing provisions laid down in this Circular.

What are responsibilities of Banking Inspection and Supervision Authority regarding foreign conventional loans in Vietnam?

Pursuant to Article 49 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating responsibilities of Banking Inspection and Supervision Authority regarding foreign conventional loans in Vietnam as follows:

1. Provide opinions from supervision of the compliance with the law on prudential ratios in banking operations by the borrower being a credit institution or foreign bank branch (under the authority of Banking Inspection and Supervision Authority to inspect and supervise micro-safety when receiving an advisory opinion request from the competent authority). The scope of supervision opinions includes opinions on individual indicators and consolidated indicators of ratios and limits reported by credit institutions and foreign bank branches in Appendix 02 appended to this Circular.

2. Inspect, examine and impose penalties for administrative violations within its jurisdiction in respect of cases of administrative violations in the course of implementing provisions laid down in this Circular.

What contents are included in the sample of Application for registration of foreign loan which is not guaranteed by the government of Vietnam?

Pursuant to Appendix 01 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating sample of Application for registration of foreign loan which is not guaranteed by the government of Vietnam as follows:

APPLICATION FOR REGISTRATION OF FOREIGN LOAN WHICH IS NOT GUARANTEED BY THE GOVERNMENT

To: The State Bank of Vietnam¹
(_ _ _ _ _ _ _ _ _ _ _ _ _ _ _)

- Pursuant to the Government's Decree No. 219/2013/NĐ-CP dated December 26, 2013 on management of enterprise’ s foreign borrowing and repayment of foreign debts which are not guaranteed by the Government;

- Pursuant to Circular No. …/20…/TT-NHNN dated ……… of the Governor of the State Bank of Vietnam on instructions on foreign exchange administration in respect of foreign borrowing and foreign debt repayment of enterprises;

- Pursuant to the foreign loan agreement signed between the parties dated…………;

The borrower, the undernamed, hereby register medium- or long-term foreign loan with the State Bank of Vietnam as follows:

PART ONE: DETAILS ABOUT THE PARTIES

I. Details about the borrower:

1. The borrower’s name: …………………………………………………………………………

2. Type of business entity of the borrower²: ………………………………………………………………………….

3. Address: …………………………………………………………………………………………

4. Phone number: …………………… Email: …………………… TIN (Taxpayer Identification Number):  ………………….

5. Full name of the legal representative: ………………………………………………….

Position: ………………………………………………………………………………………….

Full name of person authorized by legal representative (if any): ……………

- Letter of authorization: …………………………………………………………………………

6. Legal documents³:

7. Borrower's legal scope of operation⁴: (specify reference source)

8. Total investment capital of the project using loan capital (applicable to foreign loans for the purpose of executing investment projects) is …………………… in which the total contributed capital is …………. …………, total loan amount is ………… (in USD)  

9. Credit balance for the project at the time of application submission (in USD)⁵:

- Outstanding balance of short-term foreign loans: …………………… (of which overdue: ……………………)

- Outstanding balance of short-term domestic loans: …………………… (of which overdue: ……………………)

- Outstanding balance of medium- and long-term foreign loans:  …………………… (of which overdue: ……………………)

- Outstanding balance of medium- and long-term domestic loans:  …………………… (of which overdue: ……………………)

Number of medium- and long-term foreign loans of the enterprise (ongoing or outstanding as of the reporting date): ……………………………………… loans

10. Owner’s equity (according to the latest audited and reviewed financial statement before the date of submission of the application for registration of foreign loan) (in USD):

11. Details about the creditor:

1. Name of the creditor (or the creditor's representative)⁶: ……………………………………

2. Country of the creditor (or the creditor's representative):

3. Type of business entity of the creditor (or the creditor's representative)⁷:

III. Details about other related parties:

1. Account service provider:

1.1. Name of account service provider: ………………………………………………

1.2. Address of account service provider: ……………………………………………

1.3. Details about the account for foreign loan and debt repayment (hereinafter referred to as foreign loan account) opened at the account service provider:

…………………………………………………………………………………………………………

2. Other related parties in case of cash flow generation (specify name and address of related parties to the loan - if any)⁸: …………………………………………………………………

PART TWO: DETAILS ABOUT THE LOAN PURPOSE

1. Loan purpose⁹: ……………………………………………………………………………………

2. Documentation supporting the legality of the loan purpose

2.1. Documentation description¹⁰: ……………………………………………………………………………………

2.2. Approved by competent authorities¹¹ (not applicable in case the loan for execution of an investment project has been granted an investment certificate by a competent authority or has the investment policy approved) ………………………………………………………………………………………………

PART THREE: Details about the loan:

1. Date of signing of foreign loan agreement: …………………………

2. Loan value:                                                                                     Terms:

- Value in number: ……………………………………………………

- Value in words: ………………………………………………….

3. Currency of the loan:                                                                 Terms:

3.1. Currency of indebtedness amount: …………………………………………….

3.2. Currency of loan proceeds: ………………………………………………

3.3. Currency of repayment amount: ……………………………………………….

4. Type of loan¹²: ………………………………………………….

5. Loan term: ………………………………………………………                      Terms:

6. Loan interest rate: ……………………………………………………….                      Terms:

7. Kinds of fees¹³:…………………………………………………..                      Terms:

8. Penalty interest: ……………………………………………………………                   Terms:

9. Borrowing cost¹⁴: ………………………………………………………%/year Terms:

10. Plan for withdrawal of loan proceeds¹⁵:…………………………                  Terms:

11. Plan for repayment:

11.1. Plan for repayment of principal¹⁶:…………………………                  Terms:

11.2. Plan for repayment of interest¹⁷:…………………………                  Terms:

12. Security interests¹⁸:……………………………………………………..                      Terms:

12.1. Guarantee:                                                                                            Terms:

- Name of the guarantor: ………………………………………………………………

- Country of the guarantor: …………………………………………………………

- Date of signing guarantee agreement: ………………………………………………….

12.2. Other security interests:  briefly list security interests (type of security, type of collateral, grantor) and specify terms of reference in the foreign loan agreement.

12.3. Bank providing secured transactions¹⁹: …………………………………………………

13. Other conditions (if any): …………………………………………………………………

* Notes: specify the terms of reference in the foreign loan agreement for each content in this section.

14. Expected use of foreign currency from loan capital (not applicable to loans disbursed to foreign loan accounts in VND):

(i) Percentage of disbursement value expected to be sold in foreign currency to authorized credit institutions:  ……%

(ii) Purpose of using the remaining foreign currency amount (in case the rate at Point 14(i) above is less than 100%)

15. Expected purchase of foreign currency for debt repayment from authorized credit institutions:  …………………………% of loan value

16. Additional explanations (if any):

PART FOUR: COMMITMENT

The undersigned (legal representative of the borrower) undertakes to:

- Have read and studied all regulations on foreign loan conditions, regulations on foreign exchange management when signing and implementing foreign loan agreements; the regulations of law related to activities using foreign loans; regulations on implementation of foreign currency derivatives to hedge exchange rate risks before debt repayment (including but not limited to Decree No. 219/2013/ND-CP dated December 26, 2013 of the Government on management of enterprise’ s foreign borrowing and repayment of foreign debts which are not guaranteed by the Government; Circular of the Governor of the State Bank of Vietnam stipulating conditions for foreign loans of enterprises not guaranteed by the Government; Circular of the Governor of the Bank The State Bank of Vietnam on guidelines for foreign exchange management for foreign borrowing activities of enterprises and other relevant legal documents);

- Comply with regulations on administration of foreign loan and repayment; and other relevant regulations when signing foreign loan agreements and arranging foreign loans;

- Take full responsibility for the signing and performance of secured transactions related to foreign loans, ensuring that it is not contrary to the current provisions of the law on secured transactions and other regulations of relevant legislation.

- All information stated in this application and attached documents in the application for foreign loan registration of the borrower is true and correct.

Guidelines for certain contents in the Application for registration of a foreign loan which is not guaranteed by the Government

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¹ Specify that the document is to be sent to the Department of Foreign Exchange Management or a State Bank branch of province or centrally-affiliated city (according to the competence specified in Article 20 of this Circular).

² State the type of business entity of the borrower according to the following categories:

- For the corporate sector (excluding credit institutions, foreign bank branches):

+ State-owned enterprises:  Enterprises whose 100% charter capital is held by the State (SOE); enterprises whose 50% to less than 100% charter capital is held by the State (S50).

+ Foreign-invested enterprises:  Enterprises whose 51% to 100% of charter capital is owned by foreign investors (F51); Enterprises whose 10% to less than 51% of charter capital is owned by foreign investors (F10).

+ Other businesses:  Cooperatives, Unions of cooperatives, Other enterprises (KHA)

- For credit institutions, foreign bank branches:

+ Foreign-invested commercial banks: Joint venture banks, commercial banks with 100% foreign capital; non-bank credit institutions with more than 50% foreign capital, foreign bank branches (FFI).

+ State-owned credit institutions:  Credit institutions with more than 50% of charter capital owned by the State (SFI)

+ Other credit institutions: OFI

³ Specify the contents of the type of legal documents:  number, date of issue, issuing authority, and amendments and supplemental documents (if any). Depending on each borrower, these types of legal documents include:  establishment decision, establishment license, business registration certificate, business registration certificate, investment certificate, certificate of investment registration, cooperative and union of cooperatives registration papers of the borrower in accordance with the law.

⁴ Only list the main business activities and business lines recorded in the business registration certificate, establishment license, company’s charter, etc. related to the project, plan for production and business using capital from the foreign loan.

⁵ The exchange rate as specified in Clause 3, Article 20 of this Circular (the accounting exchange rate quoted by the Ministry of Finance and applied at the time of signing foreign loan agreements or foreign loan change agreements).

⁶ Specify the exact name of the creditor.  With respect to a syndicated loan, if there is none of representatives of the creditors (or the representatives of the creditors are not responsible for receiving/transferring money to the borrower), specify the information in this section for each creditor, and specify the majority creditor.   With respect to a syndicated loan, if there are representatives of the creditors and the representatives of the creditors will be responsible for receiving/transferring money related to the loan (specify creditors who do not directly transfer/receive money) to the borrower):  specify the information of the representatives of the creditors.  In the case of a loan in the form of an unregistered debt instrument issue, information about the creditor is replaced by information about the party acting as an issuing agent, trust agent, etc., depending on the structure of the issue.

⁷ State the type of business entity of the borrower according to the following categories: (i) Parent company, associate companies under the parent company; (ii) credit institution; (iii) financial fund; (iv) other international financial institutions; (v) other entities.

⁸ Only list the related parties to whom the money flows between the borrower and these related parties.  In case there are agents but there is no direct cash flow to those agents, it is not mentioned in this section.  Note that related parties may be enterprises being fully or partially divided from the original borrower but are still jointly and severally liable for the loan according to the agreement on joint liability between the creditor and the parties being fully or partially divided from the original borrower.

⁹ Specify the purpose of using the foreign loan in accordance with regulations on foreign loan conditions such as: (i) execution of investment projects; (ii) increase of the scale of business capital according to the loan use plan; (iii) restructuring of foreign debts, etc. In case the borrower uses the loan for multiple purposes, the borrower is required to specify the amount used from the foreign loan for each purpose.

¹⁰ In case the purpose of loan is to execute an investment project: A written approval of investment policies from a competent authority, an investment registration certificate according to investment regulations; etc.  In case the loan purpose is to increase the capital scale according to the plan on using the foreign loan: specify the plan on using the foreign loan approved by the competent authority; in case the loan purpose is to restructure foreign debts:  specify the plan on structuring foreign debts approved by the competent authority.

¹¹ Specify the competent authority approving the capital use plan and refer to the regulations regarding the approving authority:

- Proving that the use of capital does not require an investment registration certificate in accordance with the regulations on investment (fully citing the provisions of the law).

- Referring to legal regulations and regulations in the borrower's charter to prove the authority to approve the capital use plan.

¹² Specify: (i) Borrowing in cash: including borrowing directly in cash or through a loan entrustment contract with a non-resident trustor; (ii) Borrowing through the issuance of debt instruments (excluding international bonds); (iii) Borrowing through the form of finance lease.

¹³ Specify the domestic fees payable by residents and overseas fees payable by non-residents.

¹⁴ The enterprise shall estimate the cost of the loan on the date of submission of application for such loan. The cost of a foreign loan refers to the total cost converted as per the annual percentage of turnover of such foreign loan, including the costs relating to such foreign loan as specified in the Circular on foreign loan conditions applicable to enterprises not guaranteed by the Government.

¹⁵ The loan proceed withdrawal is consistent with the loan agreement. Unless the loan agreement otherwise stipulates the plan for loan proceed withdrawal, after considering the production and business plan as well as the capital demand of the borrower consistent with the loan agreement, the borrower shall proactively provide the proposed detailed withdrawal plan on a monthly, quarterly, biannual or annual basis.

¹⁶ The debt repayment plan is consistent with the loan agreement. Unless the loan agreement otherwise stipulates the detailed debt repayment plan, within the scope of commitments undertaken in the loan agreement, the proposed production and business plan as well as the capability of mobilizing capital sources to repay debts to the creditor, the borrower shall provide the detailed debt repayment plan on a monthly, quarterly, biannual or annual basis.

¹⁷ Clearly specify the interest payment period and the start date of interest payment.

¹⁸ Currently, the Circular does not stipulate submission of any agreement on security interests, hence, the reference to regulations on secured transactions shall base on related terms and conditions specified in the loan agreement.

¹⁹ Refer to regulations in Chapter V of this Circular.

Best regards!