Requirements to be satisfied by customers regarding bank guarantee in Vietnam

Requirements to be satisfied by customers regarding bank guarantee in Vietnam (Internet image)

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

1. Requirements to be satisfied by customers in Vietnam

Requirements to be satisfied by customers in Vietnam under Article 11 of Circular 11/2022/TT-NHNN are as follows:

- Credit institutions and FBBs shall consider and decide issuance of the guarantee, counter guarantee or guarantee confirmation to customers as long as customers meet the following requirements:

= The customer has the full legal personality and legal capacity in accordance with regulations of law;

= The guaranteed financial obligations must be lawful;

= The customer has been assessed by the credit institution or FBB issuing the guarantee to be capable of repaying sums that the credit institution or FBB has paid to fulfill the guaranteed obligations in favor of them.

- Credit institutions and FBBs shall not issue guarantee to fulfill payment obligations for bonds issued for the purposes of restructuring of the issuer’s debts, contribution of capital to or purchase of shares of another enterprise, or increase of working capital.

2. Regulations on guarantee issued to customers that are non-residents in Vietnam

Regulations on guarantee issued to customers that are non-residents according to Article 12 of Circular 11/2022/TT-NHNN are as follows:

- Credit institutions and FBBs may only provide guarantee for organizations that are non-residents and must meet one of the following requirements (the customer that is a foreign credit institution shall not be required to meet these requirements):

= The customer is an enterprise that is established and operating in a foreign country with capital contributed from Vietnamese enterprises in the form of investments prescribed in Points a, c Clause 1 Article 52 of the Investment Law or in other investment form prescribed in Point dd Clause 1 Article 52 of the Investment Law;

= The customer has fully made a deposit equivalent to 100% of the guarantee value or has ensured 100% of the guarantee value by the customer’s assets, including the customer’s deposits at the credit institution or FBB issuing the guarantee, and deposit certificates issued by the same;

= The obligee is a resident.

- FBBs shall not be allowed to provide guarantee in foreign currency for organizations that are non-residents, unless the guarantee is provided on the basis of the counter guarantee of a foreign credit institution or guarantee confirmation in respect of guaranteed obligations of a foreign credit institution to the obligee that is a resident.

- When giving guarantee in foreign currency to customers that are non-residents, credit institutions and FBBs shall:

= Comply with regulations of law regarding guidelines for foreign exchange management in overseas lending and collection of debts from provision of guarantee to non-residents;

= Has established procedures for credit risk assessment and management, including risks from provision of guarantee to non-residents.

- In addition to the provisions of this Article, other contents about the provision of guarantee for customers that are non-residents shall comply with relevant provisions of Circular 11/2022/TT-NHNN.

3. Procedures for issuing off-plan housing guarantee in Vietnam

According to Clause 4, Article 13 of Circular 11/2022/TT-NHNN, procedures for issuing off-plan housing guarantee in Vietnam are as follows:

- Based on the request of the investor or the counter-guarantor, the commercial bank shall consider, appraise and decide to issue guarantee to the investor;

- The commercial bank and the investor shall conclude a contract for off-plan housing guarantee in accordance with the provisions of Article 56 of the Law on Real Estate Business and Clause 13 Article 3, Article 15 of Circular 11/2022/TT-NHNN;

- The investor shall send the signed purchase contract or lease-purchase contract in which the investor's financial obligations are specified to the commercial bank and request it to issue the letter of guarantee to the buyer;

- The commercial bank shall, based on the received purchase contract or lease-purchase contract and the contract for off-plan housing guarantee, issue the letter of guarantee and send it to each buyer or to the investor that shall then provide it for the buyer as agreed.

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