What are the regulations on handling cases where the value of the collateral for securities-backed loans is lower than the prescribed level in Vietnam?

What are the regulations on handling cases where the value of the collateral for securities-backed loans is lower than the prescribed level in Vietnam? (Internet image)

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

1. What are the regulations on handling cases where the value of the collateral for securities-backed loans is lower than the prescribed level in Vietnam? 

The regulations on handling cases where the value of the collateral for securities-backed loans is lower than the prescribed level in Vietnam are as follows:

- In the case where the value of the collateral is re-determined to be lower than the prescribed level stated in Clause 3, Article 10 of the Regulations issued together with Decision 113/QD-VSD 2021, VSDC will send a fax notification to the borrower (Form 06/SBL of the Regulations issued together with Decision 113/QD-VSD 2021) on the same day of revaluation to request additional collateral.

- In the case where the value of the collateral is re-determined to be lower than the prescribed level but still meets the requirement of being above 110% of the securities value for borrowing in three consecutive trading days, the borrower is responsible for submitting additional collateral on the 4th working day to reach 115% of the securities value for borrowing. If the borrower fails to submit sufficient additional collateral as notified by VSDC and the revalued value of the collateral is lower than 115% of the securities value for borrowing, the loan agreement will be treated as a case of inability to repay the loan according to the provisions in Article 8 of the Regulations issued together with Decision 113/QD-VSD 2021.

- In the case where the value of the collateral is re-determined to be lower than 110% of the securities value for borrowing, the borrower is required to submit additional collateral within the deadline of 1 working day from the date of receiving the notification from VSDC to reach 115% of the securities value for borrowing. If the borrower fails to submit sufficient additional collateral as notified by VSDC and the revalued value of the collateral is lower than 115% of the securities value for borrowing, the loan agreement will be treated as a case of inability to repay the loan according to the provisions in Article 8 of the Regulations issued together with Decision 113/QD-VSD 2021.

(Article 12 of the Regulations issued together with Decision 113/QD-VSD 2021)

2. What are the regulations on withdrawal and replacement of collateral for securities-backed loans in Vietnam?

- The borrower has the right to replace the collateral with the condition that the substituted collateral must be included in the list of eligible securities for collateral and that the value of the substituted collateral meets the ratio with the loan value as prescribed by VSDC and approved by the lending party in the Securities-Backed Loan Agreement.

- In the case of collateral replacement, the borrower submits a request for collateral replacement to VSDC (Form 07/SBL of the Regulations issued together with Decision 113/QD-VSD 2021) and simultaneously enters information about the substituted collateral into the SBL system.

- The borrower is obligated to replace the collateral in the following cases:

+ The securities used as collateral do not meet the conditions specified in Clause 3, Article 9 of the Regulations issued together with Decision 113/QD-VSD 2021;

+ Government bonds reach maturity or are on the swap list.

- In the cases where collateral replacement is required according to the above provisions, VSDC sends a written request for collateral replacement (Form 08A/SBL, 08B/SBL of the Regulations issued together with Decision 113/QD-VSD 2021) via fax to the borrower on the day VSDC announces the list of eligible securities for collateral or on the working day immediately preceding the day the Government bond ceases trading on the Stock Exchange.

- Within 1 working day from the date of receiving the notification from VSDC, the borrower must submit a request for collateral replacement (Form 07/SBL of the Regulations issued together with Decision 113/QD-VSD 2021) to VSDC and simultaneously enter information about the substituted collateral into the SBL system.

If the borrower fails to submit additional collateral as notified by VSDC within the above deadline, the loan agreement will be treated as a case of inability to repay the loan.

- The borrower has the right to withdraw the collateral in the case where the revalued value of the collateral is higher than 115% of the securities value for borrowing, but can only withdraw the excess part beyond 115% of the securities value for borrowing.

In the case of collateral withdrawal, the borrower submits a collateral withdrawal request to VSDC (Form 09/SBL of the Regulations issued together with Decision 113/QD-VSD 2021) and simultaneously enters information about the collateral withdrawal into the SBL system.

(Article 14 of the Regulations issued together with Decision 113/QD-VSD 2021)

Nguyen Ngoc Que Anh

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE