Cases where loan syndication is applied in Vietnam

Cases where loan syndication is applied 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. Cases where loan syndication is applied in Vietnam

 Cases where loan syndication is applied as specified in Article 5 of Circular 42/2011/TT-NHNN are as follows:

- Demand for credit for realization of project of the customer exceeds the credit limit of the credit institution as prescribed by applicable laws.

- Financial capacity and fund resources of the credit institution cannot meet the credit demand of the project.

- The credit institution has a demand for dispersing risks.

- The customer has a demand for credit from various credit institutions for the purpose of the project.

- Credit institutions provide loan syndication to key projects under the direction of the Prime Minister.

3. Forms of loan syndication in Vietnam

Forms of loan syndication include:

- Syndicated loans.

- Syndication for guarantee.

- Syndication for discount.

- Financing syndication.

- Syndication to perform factoring.

- Syndication to implement the combination of the above credit extension forms.

- Syndication to grant credit in other forms.

(Article 4 of Circular 42/2011/TT-NHNN)

4. Principles of providing loan syndication in Vietnam

The granting of syndicated credits of a credit group is made based on the following principles:

- 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.

(Article 3 of Circular 42/2011/TT-NHNN, amended in Circular 24/2016/TT-NHNN)

Thanh Rin

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