The State Bank of Vietnam (SBV) recently issued Circular No. 45/2011/TT-NHNN, dated 30 December 2011 (Circular 45), applicable to offshore lending and debt collecting activities conducted by Vietnam-based credit institutions as well as other organizations and individuals involved in such activities.

Under Circular 45, to mitigate potential risks out of operations in international markets, the conditions and procedures for management of foreign exchange in respect of offshore lending and debt collecting activities of credit institutions are defined more clearly and coherently. In addition, Circular 45 specifies responsibilities of credit institutions in establishing credit and loan evaluation processes, risk reserves, compliance with the prudential ratios applicable to their operations and credit growth rates prescribed by the SBV from time to time.

Circular 45 focuses on the following key issues: (i) conditions and scope of offshore lending activities allowed to be conducted by credit institutions, (ii) dossiers and procedures for registration of new loans and changes in existing loans granted by credit institutions to offshore borrowers, and (iii) the reporting regime and mechanisms for coordination among agencies under the SBV for management of offshore lending and debt collecting activities of credit institutions.

According to the new guidance of the SBV credit institutions will only be allowed to provide loans to offshore enterprises with capital or shares owned by Vietnamese enterprises in the form of offshore direct investment. Other cases must be approved in writing by the SBV.

Under Circular 45 credit institutions are required to carry out procedures for loan registration with the SBV. The timeframe for such registration is as follows: (i) In respect of non-guaranteed loans: within 30 days from the date of signing the loan agreement or amendment to the loan agreement; or (ii) In respect of guaranteed loans: within 30 days from the date on which the guarantor signs the guarantee instrument or the document approving the amendment to the loan agreement. Any transaction related to offshore lending will be performed by the relevant parties ​​only after the credit institution, as a lender, has obtained the SBV's written confirmation stating that the registration of the loan agreement or amendment to the loan agreement complies with Circular 45.

The SBV alleges that the issuance of Circular 45 will contribute to improving the legislative system of Vietnam that governs capital transactions and to creating a legal framework for Vietnamese credit institutions to provide foreign exchange services in international markets.

Circular 45 takes effect from 13 February 2012. Those offshore loans prior to this date will continue to perform in accordance with the existing registration with the SBV. After this date, for any amendment related to such loans, the credit institution has to comply with Circular 45.

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