Vietnam: Conditions for a foreign loan of the credit institution

According to Article 7 of Circular No. 45/2011/TT-NHNN of the State Bank of Vietnam, when performing the foreign loan, the credit institution shall be required to satisfy following conditions:

1. To be authorized by the State Bank to deal in and supply foreign exchange services in the international market, including the lending activity in international market.

2. To comply with current provisions of the State Bank on credit growth rate, prudential ratios in activities of credit institutions.

3. To have a process of approval to foreign loans in the principle of ensuring the independence and clear assignment of individual responsibility, responsibility in the verification and decision on providing foreign loans.

4. To classify debts, making provisions against credit risk the foreign loans in accordance with current provisions of the State Bank on debt classification, making and use of provision in dealing with credit risks in banking activities by the credit institution.

5. To appraise the lending project, assessing the country's risk and ability to timely and fully collect all principal and interest debts of the foreign loans.

6. To have the plan on the mobilization and lending of foreign currency in compliance with the currency structure, term structure between the mobilization and lending, avoiding maturity risk and liquidity risk that may arise due to the performance of the foreign loan.

7. Only perform foreign loan to the business plans, projects that are conformable to the legal operation scope of foreign borrower.

8. To ensure that contents of the loan agreement and the agreements related to the foreign loan shall be in conformity with current provisions of Vietnam’s applicable laws.

Besides, foreign borrower shall be required to satisfy following conditions:

- The credit institution shall only provide a loan to a foreign borrower who is an enterprise established and operated in a foreign country to which a Vietnamese enterprise contributes its capital in the form of overseas direct investment.

- Other cases shall only be carried out upon obtaining a written approval from the State Bank.

View more details at Circular No. 45/2011/TT-NHNN of the State Bank of Vietnam, effective from June 30, 2012.

Thuy Tram

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