Conditions for ending secured by the mortgage of valuable papers in Vietnam

Conditions for ending secured by the mortgage of valuable papers in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is lending secured by the mortgage of valuable papers?

According to Clause 1, Article 2 of Circular 17/2011/TT-NHNN, lending secured by the mortgage of valuable papers (hereinafter referred to as mortgage lending) shall be a form of loan provision made by the State Bank of Vietnam (hereinafter referred to as the State Bank) to credit institutions on the basis of mortgaging valuable papers owned by the credit institutions to secure the debt repayment obligation.

In which, mortgage of valuable paper means the State Bank keeps the original valuable paper, or requires a credit institution to transfer the valuable paper to the State Bank’s account opened at the Securities Exchange Center to secure the debt repayment obligation for one or more mortgage loans of that credit institution at the State Bank. (Clause 2, Article 2, Circular 17/2011/TT-NHNN)

2. Conditions of mortgage lending in Vietnam

On the basis of orienting management of monetary policy and money supply from time to time, the State Bank of Vietnam shall decide on provision of mortgage loan to credit institutions when they fully satisfy following conditions:

- They are credit institutions as stated in Article 3 of Circular 17/2011/TT-NHNN and are not put in the special control;

Article 3. Subjects entitled to mortgage loan from the State Bank

Credit Institutions, which are established and operate in accordance with provisions of the Law on Credit Institutions, including banks, non-banking credit institutions, central People’s Credit Funds and foreign banks’ branches (hereinafter referred to as credit institutions).

- They have valuable papers qualified and subject to the list of those which are permitted to use as a mortgage for loan at the State Bank in accordance with provisions in Article 8 of Circular 17/2011/TT-NHNN;

Article 8. Valuable papers to be mortgaged

1. Criteria of valuable paper to be mortgaged:

a. To be entitled to transfer;

b. To be subject to legal ownership of credit institutions requesting for loan

c. Its remaining period is at least equal to the borrowing period;

d. It is not the valuable paper issued by the credit institution which applies for loan.

2. List, order of priority of valuable papers which are used as the mortgage for loan and the proportion between value of the valuable paper and amount of the mortgage loan at the State Bank shall be determined by the Governor of the State Bank from time to time.

- Their borrowing purposes are in compliance with objectives of monetary policy management of the State Bank from time to time;

- Availability of an application file for mortgage loan from the State Bank in compliance with provisions in Article 15 of Circular 17/2011/TT-NHNN;

- They have no overdue debt at the State Bank at the time of borrowing request;

- They have made a commitment on using the mortgage loan for the due purpose and repayment of loan principal and interest to the State Bank at the due time.

(Article 10 of Circular 17/2011/TT-NHNN)

3. Responsibilities of credit institutions which request for mortgage loan in Vietnam

Responsibilities of credit institutions which request for mortgage loan include:

- To fully, timely supply files, documents as stipulated in this Circular and take responsibility to the law for the accuracy, legality of the data, documents supplied to the State Bank.

- To comply with commitments made with the State Bank at the time of mortgage borrowing regarding the use of loan funds for due purpose, full repayment of the loan, including both principal and interest, at the due date.

- To fully transfer the valuable papers used as mortgage asset and take back the entire mortgage asset after the loan has been fully paid to the State Bank.

- To be subject to the inspection, control of the State Bank, when required, over the use of mortgage loan during the borrowing time.

-  To report on a daily basis on operation of credit institutions, capital sources and use of loans to State Bank branches of provinces or centrally run cities in which credit institutions are headquartered (below referred to as provincial-level State Bank branches 1 within the term of refinancing loans the State Bank.

(Article 20 of Circular 17/2011/TT-NHNN, amended in Circular 37/2011/TT-NHNN)

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