Vietnam: Currencies of foreign loans are foreign currencies

According to Article 7 of Circular No. 12/2014/TT-NHNN of the State Bank of Vietnam, currencies of foreign loans are foreign currencies.

The Vietnamese currency is only used in the following cases:

- The borrower is a microfinance institution;

- The borrower is a foreign-invested company that takes the loan from the distributed profit in Vietnamese currency from the direct investment by the creditor being a foreign investor that contributes capital to the borrower;

- Other cases approved by the Governor of the State bank considering the situation and necessity of the loans.

Moreover, Article 8 of Circular No. 12/2014/TT-NHNN stipulates that the security for foreign loans must comply with current Vietnam’s law. The pledge of shares, capital contributions of Vietnamese companies, or convertible bonds issued by Vietnamese companies as security for the foreign loans granted by non-resident creditors or relevant entities must comply with the regulations on securities and holdings of foreign investors in Vietnamese companies and/or relevant laws.

Concurrently, foreign loan expense is agreed by the borrower, the creditor and relevant parties, except for the case: If necessary, the Governor of the State bank shall decide the application of foreign loan expense requirements, decide and announce the ceiling level of foreign loan expense in order to regulate the limits on foreign loans without guarantor.

View more details at Circular No. 12/2014/TT-NHNN of the State Bank of Vietnam, effective from June 01, 2016.

Le Vy

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