Conditions of special bonds used as basis for refinancing in Vietnam

On November 30, 2022, the Governor of the State Bank of Vietnam issued Circular 15/2022/TT-NHNN prescribing the refinancing of loans based on special bonds of Vietnam Asset Management Company.

1. Conditions of special bonds used as basis for refinancing and refinancing extension in Vietnam

According to Article 4 of Circular 15/2022/TT-NHNN, special bonds used as the basis for refinancing or refinancing extension must meet the following conditions:

- Special bonds are under the legal ownership of a credit institution and deposited at the SBV’s Operations Center.

- They are not special bonds of which the settlement is in progress.

- They are not included in the list of special bonds whose term is to be extended by the SBV at the request of the credit institution in accordance with SBV’s regulations on purchase, sale and settlement of bad debts of Vietnam Asset Management Company (hereinafter referred to as “VAMC”).

- On the date of compilation of the list of special bonds used as the basis for refinancing or refinancing extension and on the date of provision of updated list of special bonds as prescribed in Clause 5 Article 10 of this Circular, the remaining term to maturity of these special bonds is at least 06 months greater than the requested term or extended duration of the refinanced loan.

Conditions of special bonds used as basis for refinancing in Vietnam (Internet image)

2. Conditions for refinancing on the basis of special bonds in Vietnam

Article 5 of Circular 15/2022/TT-NHNN stipulates that the SBV shall consider issuing its decision on refinancing to a credit institution that fully meets the following conditions:

- It is not being placed under special control or incurring penalties for violations as prescribed in Article 15 of Circular 15/2022/TT-NHNN.

- It has set aside the risk provision for all special bonds under its ownership in accordance with regulations of law or written approval given by a competent authority for a period of 12 consecutive months before the date of the application for refinancing.

- It has strictly complied with the prudential ratio requirement set out in Clause 1 Article 130 of the Law on Credit Institutions (as amended) and other SBV’s regulations for a period of 12 consecutive months before the date of the application for refinancing.

- Special bonds used as the basis for refinancing meet all of the conditions set out in Article 4 of Circular 15/2022/TT-NHNN.

(According to the current Circular 18/2015/TT-NHNN, the conditions for refinancing on the basis of special bonds are as follows:

- Being a credit institution specified in Clause 1, Article 2 of Circular 18/2015/TT-NHNN, legal owners of special bonds deposited at the State Bank's Transaction Office, which have not yet been paid by the Asset Management Company of Vietnam Credit Institutions.

- Provision for risks for special bonds in accordance with Decree 53/2013/ND-CP, Decree 34/2015/ND-CP and guidance of the State Bank.)

3. Refinanced loan amounts in Vietnam

Pursuant to Article 6 of Circular 15/2022/TT-NHNN, the refinanced loan amounts is prescribed as follows:

- Refinanced loan amounts shall be calculated adopting the formula in Clause 2 of this Article and shall not exceed the amounts specified in applications for refinancing of credit institutions.

- Formula for calculating a refinanced loan amount:

ST + TL x (MG - DPRR - TN)

Where:

+ ST: refinanced loan amount.

+ TL: refinancing rate which is determined according to the provisions of Appendix No. 01 enclosed herewith.

+ MG: total face value of special bonds included in the list of special bonds used as the basis for refinancing.

+ DPRR: total balance on the risk provision for special bonds included in the list of special bonds used as the basis for refinancing.

+ TN: total amount of debts collected as specified in the list of special bonds used as the basis for refinancing.

4. Refinancing interest rate in Vietnam

The refinancing interest rate is specified in Article 8 of Circular 15/2022/TT-NHNN, specifically:

- Interest rate on special bonds-based refinancing or refinancing extension is the interest rate on the refinanced loan granted on the basis of special bonds which is decided by a competent authority according to Clause 4 Article 20 of the Decree No. 53/2013/ND-CP when the refinanced loan is disbursed or given extension.

- The rate of interest on overdue principal of a refinanced loan is 150% of the interest rate on due payments of the refinanced loan that is determined when the refinanced loan becomes delinquent.

- The SBV shall not impose interests on late payment interests of the special bonds-based refinanced loans.

Circular 15/2022/TT-NHNN takes effect from January 17, 2022 and replaces Circular 18/2015/TT-NHNN.

Nhu Mai

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