What are regulations on foreign exchange management in guarantee transactions in Vietnam?

What are regulations on foreign exchange management in guarantee transactions in Vietnam?

Pursuant to Article 4 of the Circular 11/2022/TT-NHNN (takes effect from 01/04/2023) stipulating foreign exchange management in guarantee transactions in Vietnam as follows:

1. Issuance of guarantees in foreign currency by a credit institution or FBB must be relevant to the scope of foreign exchange operations on the domestic and international markets specified in operating license of that credit institution or FBB.

2. Credit institutions and FBBs shall only be allowed to issue guarantees in foreign currency to their customs in respect of lawful financial obligations in foreign currency as prescribed by law.

When shall guarantee is not given, restricted and credit limit is determined in Vietnam?

Pursuant to Article 5 of the Circular 11/2022/TT-NHNN (takes effect from 01/04/2023) stipulating as follows:

When issuing guarantees, credit institutions and FBBs must comply with regulations of the Law on Credit Institutions and guidelines given by the State Bank of Vietnam (hereinafter referred to as “SBV”) on cases in which credit extension is not made, restricted and credit limits are determined.

How to determine guarantee balance in Vietnam?

Pursuant to Article 6 of the Circular 11/2022/TT-NHNN (takes effect from 01/04/2023) stipulating determination of guarantee balance in Vietnam as follows:

1. The balance of guarantee given to a customer or a customer and related persons is the balance arising from the issuance of guarantee commitment, counter guarantee commitment and guarantee-confirmation commitment to that customer or that customer and related persons.

2. The balance of guarantee given to a customer or a customer and related persons is determined from the issue date of the guarantee commitment.

3. The balance of off-plan housing guarantee shall be determined according to the provisions of Clause 8 Article 13 of this Circular.

What language shall be used in bank guarantee in Vietnam?

Pursuant to Article 7 of the Circular 11/2022/TT-NHNN (takes effect from 01/04/2023) stipulating language use as follows:

1. Guarantee issuance agreement and guarantee commitment must be written in Vietnamese, except the cases in Clause 2 of this Article.

2. Credit institutions/FBBs are allowed to reach agreement with relevant parties on use of foreign language in the following cases:

a) Guarantee transaction is considered a civil relation involving foreign elements as defined in the Civil Code;

b) Guaranteed obligations arise from the execution of projects funded by international finance organizations. The list of international finance organizations is enclosed with the SBV’s regulations on prudential limits and ratios for operations of credit institutions and FBBs;

c) Guaranteed obligations arise from performance of international contract packages.

3. If documents or messages in foreign language are translated into Vietnamese at the request of competent authorities, the translations must be certified by the legal representative of the credit institution or FBB or lawfully notarized or certified and accompanied by their original documents in foreign language.

What are regulations on applied practices and dispute settlement in bank guarantee in Vietnam?

Pursuant to Article 8 of the Circular 11/2022/TT-NHNN (takes effect from 01/04/2023) stipulating applied practices and dispute settlement in bank guarantee in Vietnam as follows:

1. Parties involved in a bank guarantee, counter guarantee, guarantee confirmation, or co-guarantee, shall be allowed to reach agreement on application of commercial practices in accordance with the provisions of Clause 4 Article 3 of the Law on Credit Institutions.

2. All disputes arising from a guarantee transaction shall be settled under agreement between the parties in accordance with regulations of law. If a guarantee involves foreign elements, the parties may reach agreement on applicable laws and dispute-settling authority (including foreign commercial arbitration or court) to settle any disputes concerning the guarantee transaction.

Best regards!