Extension of syndicated loans authorised

The State Bank of Vietnam issued Circular No 42/2011/TT-NHNN on December 15, providing for the extension of syndicated loans by two or more credit institutions and branches of foreign banks to borrowers with projects or business plans in Vietnam.

Under the circular, syndicated loans jointly extended by more than one credit institution in the form of a loan, discount, financial lease, factoring, bank guarantee or other forms of credit can be extended on the basis of the voluntary engagement of the participants in response to the demand of the borrower,
or when the financial capacity or funds of a participating credit institution does not meet the demands of the project, or due to the need to disperse remaining risk among the credit institutions, or financing is needed for important projects as directed by the Government.

In general, credit institutions engaging in a syndicated loan must be incorporated and operating under the Law on Credit Institutions, in compliance with prudential ratios after entering the syndicated loan agreement, and in non-breach of limits on credit extension in the Law on Credit Institutions.

Foreign credit institutions must be incorporated under foreign law and in compliance with regulations on investment, lending and foreign exchange. In the case of a syndicated loan with the participation of a foreign credit institution, the borrower must satisfy requirements on foreign loan registration, the opening and use of loan accounts, repayment of foreign debt and other relevant regulations.

The circular took effect on December 15, replacing Decision No 286/2002/QD-NHNN of April 2002, Decision No 886/2003/QD-NHNN of August 2003, and Circular No 08/2006/TT-NHNN of October 2006.