Procedures for arrangement of loan syndication in Vietnam

Procedures for arrangement of loan syndication in Vietnam (Internet image)

1. What is loan syndication?

According to Clause 1, Article 2 of Circular 42/2011/TT-NHNN, loan syndication shall mean the provision of loan syndication by two (02) credit institutions and more to customers through the operations of lending, discount, finance leasing, factoring, banking guarantee and other credit operations.

2. Procedures for arrangement of loan syndication in Vietnam

The procedures for arrangement of loan syndication according to Article 9 of Circular 42/2011/TT-NHNN are as follows:

- Based on the invitation of the credit institution that is the head member in the arrangement, the invited credit institution shall review and provide official reply in writing to the arranging credit institution as to acceptance (to state clearly the maximum amount to be contributed) or refusal of participating in the loan syndication.

- If the number of participating credit institutions and committed credit amount of the participating credit institution has not satisfied the requirement of the project, the credit institution that acts as the head member in arrangement may issue invitation letters to other eligible institutions to participate in.

- Based on the reply of the invited institutions, the credit institution that acts as a head in the arrangement shall consider the number of members to participate in the loan syndication and convoke a meeting of members for discussing matters relating to the provision of loan syndication.

3. Appraisal and decision on the provision of loan syndication in Vietnam

Appraisal and decision on the provision of loan syndication by credit institutions according to Article 10 of Circular 42/2011/TT-NHNN as follows:

- Members shall agree on the form of appraisal for the project of loan syndication, ratify the appointment of representative for co-appraisal and authorize the head credit institution in the credit extension or hire an external appraiser of the third party.

- Appraisal expenses shall be agreed upon by the members and made in writing.

- Based on the final appraisal result, the members shall consider and make decision on the proportion of loan syndication, inform the head member in the arrangement of loan syndication and take self-responsibility for their decision.

4. Secured assets in the loan syndication in Vietnam

Article 13 of Circular 42/2011/TT-NHNN stipulates the secured assets in the loan syndication as follows:

- The members shall agree and decide on the form of security with or without assets in line with provisions of applicable laws.

- The members shall agree on the appointment of representative or authorize the head member who receives secured assets to represent for the loan syndication provider in management, supervision and disposal of secured assets for the credit facility in accordance with provisions of applicable laws.

- The members shall be entitled to receive the principal amount and be obliged to pay for the arising expenses in proportion with the syndication ratio in case where the loan syndication provider disposes the secured assets for debt collection. These expenses shall be agreed and specified in the syndication contract and credit contract.

5. Principles of providing loan syndication in Vietnam

Principles of providing loan syndication according to Article 3 of Circular 42/2011/TT-NHNN (amended in Circular 24/2016/TT-NHNN) are as follows:

- The provision of loan syndication is performed on the basis of the voluntary participation of members, in the principle of co-appraisal, co-deciding to extend credit to the customer and joint responsibility for the result of the credit extension.

- Syndicate members shall make capital (or obligations) contribution according to the proportion  set forth in the capital syndication contract, receive shared interests and fees and share expenses and risks incurred as stipulated in the capital syndication contract.

Fees for granting syndicated loans shall be agreed upon between lenders and clients under current Vietnam’s regulations of laws.

- A lead lender may play the role as the member taking charge of arrangement of syndicated loans, payment or custody of pledged assets. Such lead lenders shall be appointed  by other members in accordance with Vietnam’s regulations of laws.

Foreign credit institutions participating in syndicated loans shall not be entitled to assume a role as the member taking charge of  payment activities.

- Members shall be responsible for performing the assigned duties and receive compensation from the performance of duties that are authorized by other members.

- The loan syndication for a specific operation shall be based on provisions of this Circular and regulations applicable to such specific operation.

Quoc Dat

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