CIRCULAR

ON FOREIGN CURRENCY LOANS GRANTED TO RESIDENTS BY CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Ordinance on Foreign exchange No. 28/2005/PL-UBTVQH11 dated December 13, 2005 and the Ordinance on amendments to the Ordinance on Foreign Exchange No. 06/2013/PL-UBTVQH13 dated March 18, 2013;

Pursuant to the Government’s Decree No. 70/2014/ND-CP dated July 17, 2014 on guidelines for the Ordinance on foreign exchange and the Ordinance on the amendments to a number of articles of the Ordinance on foreign exchange;

Pursuant to the Government's Decree No. 156/2013/NĐ-CP dated November 11, 2013 defining the functions, tasks, entitlements and organizational structures of the State Bank of Vietnam;

At the request of the Director of the Financial Policy Department;

The Governor of the State Bank of Vietnam promulgates a Circular on foreign currency loans granted to residents by credit institutions.

Article 1. Scope

This Circular deals with foreign currency loans granted to residents by credit institutions and branches of foreign banks (hereafter referred to as credit institutions).

Article 2. Regulated entities

1. Credit institutions that are licensed to trade in foreign exchange and grant foreign currency loans.

2. Borrowers being residents applying for loans at credit institutions as prescribed in the law on lending activities.

Article 3. Demands for foreign currency loans

1. Credit institutions shall consider granting the foreign currency loans serving certain purposes as specified below:

a) Short-term, mid-term and long-term loans used as outward remittance for imported goods or services, when the borrowers’ foreign currency derived from their business operation is sufficient to repay such loans;

b) Short-term loans granted to central petroleum importers who are given annual quotas on petroleum import by the Ministry of Industry and Trade to pay for such import when the borrowers’ foreign currency derived from their business operation is not sufficient to repay such loans;

c) Short-term loans granted to meet domestic enterprises’ demands for short-term capital to serve the purpose of implementing their plans to manufacture and/or trade goods exported through Vietnam’s border checkpoints when borrowers’ foreign currency derived from the export turnover is sufficient to repay such loans; on receipt of loans disbursed by credit institutions, borrowers shall sell such borrowed foreign currency to the lending credit institutions in the form of a foreign-exchange spot transaction, unless the loans borrowers are used by the borrowers to make payments in which foreign currency is compulsory as stipulated by laws. Point 1.c shall be effective till the end of March 31, 2016;

d) Loans used as direct outward investments in important national projects which are subject to investment decisions made by the National Assembly, the Government or the Prime Minister, and have been granted the Outward Investment Certificate by the Ministry of Planning and Investment.

2. After obtaining the written consent from the State Bank of Vietnam according to the procedures stipulated in Article 4 hereof with respect to specific cases, credit institutions shall be permitted to consider their lending decisions on the foreign currency loans serving purposes other than those specified in Clause 1 of this Article but given priority as prescribed in Resolutions, Decrees, Decisions, Directives and other documents of the Government and the Prime Minister.

Article 4. Procedures for approving application for foreign currency loans

1. If there is any demand for foreign currency loans prescribed in Clause 2, Article 3 hereof, the credit institution shall send a written request to the State Bank of Vietnam for permission to grant foreign currency loans, which contains the following information:

a) The credit institution’s commitment that the plan to use the loan capital is evaluated and feasible, to the borrower satisfies loan requirements prescribed in the Law on lending activities, and the loans can be collected on schedule (principal and interest);

b) The credit institution’s detailed report on the specific contents they have evaluated and approved the grant of loans to borrowers: client’s demand for foreign currency loans used for implementing projects or plans given priority as prescribed in Resolutions, Decrees, Decisions, Directives and other documents of the Government and the Prime Minister; the loan limit approved by credit institutions; the report on production and business activities, financial health, monetary sources used for debt repayment made by borrowers, and other contents, with the purpose of ensuring plans to use such loan capital is feasible, client’s eligibility for such loans as stipulated by laws;

c) The credit institution’s detailed report on foreign currency capital used as loans as well as shall be committed to balancing their foreign currency capital in conformity with the loan term and limit; the loan approval required to comply with applicable laws on lending activities, foreign exchange management, credit limit, safety ratios in terms of banking transactions performed by credit institutions and other relevant laws;

d) The credit institution’s commitment to taking responsibility for the evaluation results, decisions on foreign currency loans granted to borrowers as well as any content and information provided in the written request.

2. Procedures for approving an application for permission to grant foreign currency loans:

a) The credit institution shall submit directly or by post the written request for permission to grant foreign currency loans to the State Bank of Vietnam (the Financial Policy Department).

b) The State Bank of Vietnam shall consider approving grant of foreign currency loans from credit institutions in accordance with the regulations prescribed in Resolutions, Decrees, Decisions, Directives and other documents of the Government, the Prime Minister on sectors given the priority and incentive for development of production and business activities, changes in foreign exchange market, targets of currency policies, regulations enshrined in this Circular, and contents of the written request submitted by these credit institutions;

c) Within 30 working days from the receipt of the written request submitted by credit institution with sufficient information prescribed in Clause 1 of this Article, the State Bank of Vietnam shall send a written notification which specifies whether the request is granted or rejected, and provide explanation if the request is rejected.

Article 5. Currency used for loan repayment

1. With regard to foreign currency loans, prescribed in Point a, Point c, Point d Clause 1 and Clause 2 Article 3 hereof, which borrowers have sufficient foreign currency revenues to repay: borrowers shall pay the loan principal and interest by the currency that they borrow; in case borrowers repay debts by another foreign currency, they shall be bound to the agreement between the credit institutions and borrowers in conformity with relevant laws.

On the due date of the foreign currency loan, if borrower’s late repayment in foreign currency is caused by unexpected events such as borrower’s deferred collection of foreign-currency operating revenues, borrower’s inadequacy of foreign currency earned from production and business activities or other legal revenues to repay loans after being inspected and confirmed in writing by the lending credit institution, the lending credit institution shall sell foreign currency to the borrower for the borrower to repay the loan, and the borrower shall make a commitment to resell such foreign currency back to the lending credit institution when earning enough foreign currency from their business operation.

2. With regard to foreign currency loans, prescribed in Point b Clause 1 and Clause 2 Article 3 hereof, which borrowers lack legal foreign currency revenues to repay, the lending credit institution shall sell foreign currency to the borrower in order for the borrower to repay principal and interest.

Article 6. Responsibilities of credit institutions

1. Credit institutions shall grant loans in foreign currency in accordance with regulations prescribed in this Circular, regulations on lending, foreign exchange management activities, and safety ratio that banking transactions performed by credit institutions must achieve as well as other relevant laws. If there exist any difference in regulations between this Circular and other documents of the State Bank of Vietnam on foreign currency lending, regulations enshrined in this Circular shall be applied.

2. Credit institutions shall ensure that foreign currency capital is balanced to conform to the loan duration and limit when approving foreign currency loans.

3. In case borrowers lack foreign currency earned from their legal foreign currency revenues to make their loan repayment as prescribed in Article 5 hereof, credit institutions shall ensure that their legal foreign currency capital is balanced to be sold to borrowers for the purpose of repaying their loan principal and interest.

4. Not later than the 12^th of the month preceding the reporting month, credit institutions shall file a report on foreign-currency lending activities by filling out Form 01 and Form 02 issued together with this Circular to the State Bank of Vietnam.

Article 7. Implementation

1. This Circular takes effect from January 01, 2016;

2. The Circular No. 43/2014/TT-NHNN of the Governor of the State Bank of Vietnam dated December 25, 2014 on providing regulations on granting the foreign-currency loans of credit institutions to residents shall be annulled.

3. With regard to loans that apply the methods of one loan at a time, loan for investment project, syndication loan according to credit contract signed by the day this Circular taking effect on, credit institutions and borrowers shall perform the contents in the credit contract signed in accordance with regulations of applicable laws at the time the credit contract signed or agree to amend the credit contract in conformity with regulations in this Circular. In regard to loans that follow the lending models of credit limit and revolving credit as agreed upon in credit contract signed before the effective date of this Circular, and that are disbursed from January 01, 2015, credit institutions and borrowers shall implement the regulations laid down in this Circular.

4. The Chief Officers, the Director of the Financial Policy Department and Heads of affiliates of the State Bank of Vietnam, Director of Provincial Branches of the State Bank of Vietnam; President of the Board of Directors, President of the Member Assembly and General Director (Director) of credit institutions shall be responsible for implementing this Circular./.