Tiếng Việt

Legal update relating to Finance and Credit (Monthly Legal Update – 04/2023)

by | Apr 28, 2023 | Banking, EN, Legal Update | 0 comments

1. LEGAL DOCUMENTS ARE EFFECTIVE FROM 01/04/2023

1.1.  Circular No. 11/2022/TT-NHNN regulating on bank guarantee

  • Name of legal document: Circular 11/2022/TT-NHNN issued on 30/09/2022 by the State Bank of Vietnam regulating on bank guarantee (referred to as the “Circular No. 11/2022/TT-NHNN”).
  • Effective date: 01/04/2023.

The content should be noted:

  • Firstly, stipulating on cases of non-guarantee, guarantee restriction and implementation of credit limit

Specifically, Article 5 of Circular No. 11/2022/TT-NHNN stipulates: “Article 5. Cases of non-guarantee, guarantee restriction and implementation of credit limit

When making guarantees, credit institutions and foreign bank branches must comply with the provisions of the Law on Credit Institutions and the guidance of the State Bank of Vietnam (hereinafter referred to as the State Bank) about the cases of not being granted credit, restrict credit granting, limiting credit granting.”

  • Secondly, stipulating on requirements for customers.

Specifically, Article 11 of Circular No. 11/2022/TT-NHNN stipulates: “Article 11. Requirements for customers

    1. Credit institutions, foreign bank branches shall consider and decide to grant guarantees, reciprocal guarantees, and confirm guarantees for customers when customers satisfy the following requirements:a) Having full civil legal capacity and civil act capacity as prescribed by law;b) The guaranteed obligation is a lawful financial obligation;c) Being assessed by the credit institution, foreign bank’s branch with guarantee to be able to repay the amount that the credit institution or foreign bank branch has to pay on behalf of when performing the guarantee obligation.
    2. Credit institutions, foreign bank branches are not allowed to guarantee for the bond payment obligations of the issuing enterprises for the purposes of: restructuring the debts of the issuing enterprises themselves; contribute capital, buy shares in other enterprises and increase the scale of operating capital.”

1.2. Decision No. 574/QĐ-NHNN refinancing interest rate, re-discount interest rate, interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State bank of Vietnam to credit institutions and foreign bank branches

  • Name of legal document: Decision 574/QĐ-NHNN issued on 31/03/2023 by the State Bank of Vietnam refinancing interest rate, re-discount interest rate, interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State bank of Vietnam to credit institutions and foreign bank branches (referred to as the “Decision No. 574/QĐ-NHNN”).
  • Effective date: 04/03/2023.

The content should be noted: The interest rates are adopted by the State Bank of Vietnam.

Specifically, Article 1 of Decision No. 574/QĐ-NHNN stipulates: “Article 1. The following interest rates are adopted by the State Bank of Vietnam, including:

  1. Refinancing interest rate: 5,5%/year.
  2. Re-discount interest rate: 3,5%/year.
  3. Interest rate on overnight loans in interbank electronic payment and loans for making up fund deficits in clearing payment given by the State Bank of Vietnam to credit Institutions and foreign bank branches: 6,0%/year.”

1.3. Decision No. 575/QĐ-NHNN maximum interest rates of deposits in Vietnamese dong of organizations and individuals at credit institutions and foreign bank branches according to Circular No. 07/2014/TT-NHNN dated March 17, 2014

  • Name of legal document: Decision 575/QĐ-NHNN issued on 31/03/2023 by the State Bank of Vietnam maximum interest rates of deposits in Vietnamese dong of organizations and individuals at credit institutions and foreign bank branches according to Circular No. 07/2014/TT-NHNNdated March 17, 2014 (referred to as the “Decision No. 575/QĐ-NHNN”).
  • Effective date: 04/03/2023.

The content should be noted: Maximum interest rates of deposits in Vietnamese Dong (VND) of organizations (except credit institutions and foreign bank branches) and individuals at credit institutions and foreign bank branches according to Circular No. 07/2014/TT-NHNN.

Specifically, Article 1 of Decision No. 575/QĐ-NHNN stipulates: “Article 1. Maximum interest rates of deposits in Vietnamese Dong (VND) of organizations (except credit institutions and foreign bank branches) and individuals at credit institutions and foreign bank branches according to Circular No. 07/2014/TT-NHNN dated March 17, 2014 are as follows:

  1. The maximum interest rate of demand deposits and deposits with a term less than 1 month is 0,5%/year.
  2. The maximum interest rate of deposits with a term from 1 month to less than 6 months is 5,5%/year. Particularly, people’s credit funds and microfinance institutions shall apply the maximum interest rate of 6,0%/year with respect to deposits with a term from 1 month to less than 6 months.”

1.4. Decision No. 576/QĐ-NHNN prescribing maximum interest rates of short-term loans in Vietnamese dong granted by credit institutions and foreign bank branches to meet borrowers’ funding demand in certain business sectors according to Circular No. 39/2016/TT-NHNN dated December 30, 2016

  • Name of legal document: Decision 576/QĐ-NHNN issued on 31/03/2023 by the State Bank of Vietnam prescribing maximum interest rates of short-term loans in Vietnamese dong granted by credit institutions and foreign bank branches to meet borrowers’ funding demand in certain business sectors according to Circular No. 39/2016/TT-NHNNdated December 30, 2016 (referred to as the “Decision No. 576/QĐ-NHNN”).
  • Effective date: 04/03/2023.

The content should be noted: Maximum interest rates of short-term loans in Vietnamese Dong (VND) according to Clause 2 Article 13 of the Circular No. 39/2016/TT-NHNN.

Specifically, Article 1 of Decision No. 576/QĐ-NHNN stipulates: “Article 1. Maximum interest rates of short-term loans in Vietnamese Dong (VND) according to Clause 2 Article 13 of the Circular No. 39/2016/TT-NHNN dated December 30, 2016 are as follows:

  1. Credit institutions and foreign bank branches (except people’s credit funds and microfinance institutions) shall grant short-term loans in VND with the maximum interest rate of 4,5%/year.
  2. People’s credit funds and microfinance institutions shall grant short-term loans in VND with the maximum interest rate of 5,5%/year.”

1.5. Circular No. 02/2023/TT-NHNN providing instructions for credit institutions and foreign branch banks on debt rescheduling and retention of debt category to assist borrowers in difficulties

  • Name of legal document: Circular 02/2023/TT-NHNN issued on 23/04/2023 by the State Bank of Vietnam providing instructions for credit institutions and foreign branch banks on debt rescheduling and retention of debt category to assist borrowers in difficulties (referred to as the “Circular No. 02/2023/TT-NHNN”).
  • Effective date: 24/04/2023.

The content should be noted:

  • Firstly, stipulating on debt rescheduling.

Specifically, Article 4 of Circular No. 02/2023/TT-NHNN stipulates: “Article 4. Debt rescheduling

A credit institution or foreign branch banks may consider rescheduling outstanding debt, including the principal and/or interest (including the debts regulated by the Government’s Decree No. 55/2015/ND-CP dated June 09, 2015 on credit policies serving development of agriculture and rural areas (with amendments)) on the basis of borrowers’ requests, its financial capacity and compliance with the following regulations:

  1. The outstanding debt is principal of a loan or finance lease granted before the effective date of this Circular, and from lending and finance lease.
  2. The principal and/or interest have to be paid within the period from the effective date of this Circular to June 30, 2024 inclusive.
  3. The outstanding debt to be rescheduled is undue or up to 10 (ten) days overdue according to the loan/finance lease agreement.
  4. The credit institution or foreign branch banks determines that the borrower is unable to repay the principal and/or interest on schedule under the signed agreement due to decrease in revenue or income compared to that specified in the principal and/or interest repayment plan under the signed agreement.
  5. The credit institution or foreign branch banks determines that the borrower is able to fully repay the principal and/or interest after the debt is rescheduled.
  6. Debts that violate regulations of law shall not be rescheduled.
  7. Rescheduling time (including repayment deadline extension) shall vary according to the degree of difficulty facing the borrower and shall not exceed 12 months from the due date of the outstanding debt to be rescheduled.
  8. Debt rescheduling under regulations of this Circular shall be carried out from the effective date of this Circular to June 30, 2024 inclusive.”
  • Secondly, stipulating on retention of debt category and debt classification.

Specifically, Article 5 of Circular No. 02/2023/TT-NHNN stipulates: “Article 5. Retention of debt category and debt classification

  1. Credit institutions and Foreign branch banks may retain the debt categories with respect to the debt whose principal and/or interest has been rescheduled (hereinafter referred to as “rescheduled debt”) under regulations of this Circular in the same manner as the debt categories that have been assigned in accordance with SBV Governor’s regulations on classification of assets, rates and methods of making loan loss provision and use of loan loss provision for handling of risks arising from operations of credit institutions and Foreign branch banks at the nearest time before prior to the debt rescheduling according to regulation of this Circular.
  2. After debt rescheduling and retention of debt categories are carried out as prescribed in clause 1 of this Article within the time limit for rescheduling, credit institutions and Foreign branch banks are not required to put these debts into a higher-risk category according to SBV Governor’s regulations on classification of assets, rates and methods of making loan loss provision and use of loan loss provision for handling of risks arising from operations of credit institutions and Foreign branch banks.
  3. If the outstanding debts after rescheduling and retention of debt categories prescribed in clause 1 of this Article are not granted another debt rescheduling by the credit institution or foreign branch banks according to regulations of this circular, the credit institution or foreign branch banks shall carry out debt classification in accordance with SBV Governor’s regulations on classification of assets, rates and methods of making loan loss provision and use of loan loss provision for handling of risks arising from operations of credit institutions and Foreign branch banks.
  4. From the rescheduling date, credit institutions and foreign branch banks shall not record the interests on the outstanding debts that are rescheduled and debts that remain current non-performing loans (Category 1) as prescribed in this Circular as revenue (estimated). Instead, they shall be monitored off-balance sheet and recorded as revenue when they are collected in accordance with regulations of law on financial regimes applicable to credit institutions and foreign branch banks.”

1.6. Circular No. 03/2023/TT-NHNN providing on ceasing the implementation effective of Clause 11 Article 4 Circular No. 16/2021/TT-NHNN date November 10, 2021 of the Governer of the State bank of Vietnam on corporate bond trading of credit institutions and branches of foreign banks

  • Name of legal document: Circular 03/2023/TT-NHNN issued on 23/04/2023 by the State Bank of Vietnam providing on ceasing the implementation effective of Clause 11 Article 4 Circular No. 16/2021/TT-NHNN date November 10, 2021 of the Governer of the State bank of Vietnam on corporate bond trading of credit institutions and branches of foreign banks (referred to as the “Circular No. 02/2023/TT-NHNN”).
  • Effective date: 24/04/2023.

The content should be noted: Stipualting on cessation of effect from April 24, 2023 to the end of December 31, 2023 for the provisions of Clause 11 Article 4 of Circular No. 16/2021/TT-NHNN.

Specifically, Article 1 of Circular No. 03/2023/TT-NHNN stipulates: “Article 1. Cessation of effect from April 24, 2023 to the end of December 31, 2023 for the provisions of Clause 11 Article 4 of Circular No. 16/2021/TT-NHNN.

During the cessation period of Clause 11 Article 4 of Circular No. 16/2021/TT-NHNN as prescribed in this Article, credit institutions, foreign bank branches (hereinafter referred to as credit institutions) may redeem corporate bonds that have not been listed on the stock market or have not been registered for trading on the Upcom trading system (hereinafter referred to as unlisted corporate bonds) that have been sold by a credit institution and/or Unlisted corporate bonds may be issued in the same lot/phrase as unlisted corporate bonds sold by a credit institution when:

  1. a) Satisfy the provisions of Article 4 of Circular No. 16/2021/TT-NHNN;
  2. b) The buyer of this corporate bond from a credit institution shall pay the entire amount of the purchase of corporate bonds at the time the credit institution signs a contract to sell corporate bonds to the bond buyer;
  3. c) The bond issuer is rated at the highest level according to the credit institution’s internal credit rating regulations at the latest time before the credit institution purchases corporate bonds.”

1.7. Circular No. 17/2022/TT-NHNN providing guidelines on environmental risk management in credit extension by credit institutions and foreign bank branches

  • Name of legal document: Circular 17/2022/TT-NHNN issued on 23/12/2022 by the State Bank of Vietnam providing guidelines on environmental risk management in credit extension by credit institutions and foreign bank branches (referred to as the “Circular No. 17/2022/TT-NHNN”).
  • Effective date: 01/06/2023.

The content should be noted: Internal regulations on environmental risk management in extending credit.

Specifically, Article 6 of Circular No. 17/2022/TT-NHNN stipulates: “Article 6. Internal regulations on environmental risk management in extending credit

  1. Each credit institution shall formulate its own internal regulations on environmental risk management in extending credit which may be separated from or included in its internal regulations on credit extension and internal control, and must be conformable with regulations of law on credit extension and credit risk management.
  2. Internal regulations on environmental risk management in extending credit of a credit institution shall, inter alia, have the following contents:
  3. a) Identification and classification of applications for credit extension which require environmental risk assessment in extending credit;
  4. b) Information to be collected to serve the environmental risk management in extending credit;
  5. c) Environmental risk assessment in extending credit that is carried out in conformity with the provisions of this Circular;
  6. d) Environmental risk management in extending credit during the consideration, appraisal, approval and management of credit amounts extended;
  7. dd) Internal reporting on environmental risk management in extending credit.”

2. LEGAL DOCUMENTS ARE ISSUED IN 03/2023

2.1.  Decision No. 313/QD-NHNN pertaining to refinancing interest rate, rediscounting interest rate, and interest rate of overnight lending for interbanking electronic payments and loans compensating for shortage of funds used for the State Bank of Vietnam’s settlement transactions with credit institutions and foreign bank branches

  • Name of legal document: Decision No. 313/QD-NHNN issued on 14/03/2023 by the State Bank of Vietnam pertaining to refinancing interest rate, rediscounting interest rate, and interest rate of overnight lending for interbanking electronic payments and loans compensating for shortage of funds used for the State Bank of Vietnam’s settlement transactions with credit institutions and foreign bank branches (referred to as the “Decision No. 313/QD-NHNN”).
  • Effective date: 15/03/2023.

The content should be noted: Stipulating on the State Bank of Vietnam’s interest rates.

Specifically, Article 1 of Circular No. 313/QD-NHNN stipulates: “Article 1. Regulations on SBV’s interest rates, including:

  1. Refinancing interest rate: 6.0%/year.
  2. Rediscounting interest rate: 3.5%/year.
  3. Interest rate of overnight lending for interbanking electronic payments and loans compensating for shortage of funds used for SBV’S settlement transactions with credit institutions and foreign bank branches: 6.0%/year.”

2.2. Decision No. 314/QD-NHNN pertaining to maximum short-term lending interest rates in Vietnam Dong of credit institutions and foreign bank branches applied to loan borrowers to meet capital demands for certain sectors and industries as per Circular No. 39/2016/tt-nhnn dated december 30, 2016

  • Name of legal document: Decision No. 314/QD-NHNN issued on 14/03/2023 by the State Bank of Vietnam pertaining to maximum short-term lending interest rates in Vietnam Dong of credit institutions and foreign bank branches applied to loan borrowers to meet capital demands for certain sectors and industries as per Circular No. 39/2016/tt-nhnndated december 30, 2016 (referred to as the “Decision No. 314/QD-NHNN”).
  • Effective date: 15/03/2023.

The content should be noted: Stipulating on the maximum interest rates applied to Vietnamese-dong short-term loans according to clause 2 of Article 13 in the Circular No. 39/2016/TT-NHNN.

Specifically, Article 1 of Circular No. 314/QD-NHNN stipulates: “Article 1. Maximum interest rates applied to Vietnamese-dong short-term loans according to clause 2 of Article 13 in the Circular No. 39/2016/TT-NHNN dated December 30, 2016 shall be as follows:

  1. Credit institutions and foreign bank branches (except people’s credit funds and microfinance institutions) will apply the maximum interest rate of 5.0%/year to Vietnamese-dong short-term loans.

2. People’s credit funds and microfinance institutions will apply the maximum interest rate of 6.o%/year to Vietnamese-dong short-term loans.”