Thông tư 42/2011/TT-NHNN

CIRCULAR

PROVIDING FOR THE PROVISION OF SYNDICATED LOANS BY CREDIT INSTITUTIONS TO CUSTOMERS

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

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

- Pursuant to the Decree No. 96/2008/ND-CP dated 26 August 2008 of the Government providing for the functions, duties, authorities and organizational structure of the State Bank of Vietnam;

The State Bank of Vietnam (hereby shortly referred to as the State Bank) provides for the provision of syndicated loans by credit institutions to their customers as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Governing scope and subjects of applications

1. Governing scope

This Circular provides for the provision of syndicated loan by credit institutions, foreign bank's branches (hereinafter collectively referred to as credit institutions) to customers who have production and business projects in Vietnam.

2. Subjects of application a. Commercial banks;

b. Cooperative banks, People's credit funds;

c. Finance companies, finance leasing companies;

d. Foreign bank's branches;

dd. Foreign credit institutions;

e. Customers.

3. Where participating in the loan syndication to customers in Vietnam, foreign credit institutions shall be required to comply with provisions on the extension of syndicated credit as provided for in this Circular, regulations on investment, lending, regulations on foreign exchange control and other provisions of applicable laws.

4. Central People's Credit funds shall provide syndicated credit to customers in accordance with provisions of this Circular during the time when they have not been transformed to the operation model of cooperative Banks in accordance with provisions of Law on Credit institution 2010.

Article 2. Interpretation

In this Circular, following terms shall be construed as follows:

1. Loan syndication shall mean the provision of loan syndication by two (02) credit institutions and more to customers through the operations of lending, discount, finance leasing, factoring, banking guarantee and other credit operations.

2. Loan syndication party shall mean the credit institutions, foreign credit institutions as mentioned in Paragraph 2, Paragraph 3 Article 1 of this Circular, which all together commit to provide loan to customers for performing a project or a part of a project, plan of production and business (hereinafter shortly referred to as project).

3. Members participating in the loan syndication (hereinafter shortly referred to as member) shall mean the credit institutions (authorized branch of the credit institution in accordance with applicable provisions), foreign bank's branches in Vietnam, foreign credit institutions that participate in the loan syndication in line with provisions of this Circular.

4. Head member in arrangement of loan syndication shall mean the credit institution, which receives application file for credit of the customer and issue a letter for inviting other credit institutions participating in the loan syndication or which is selected by the members of the loan syndication to act on behalf of other members. This member shall act as a head in arranging the provision of loan syndication to the customer.

5. Head member in provision of loan syndication shall mean the capable member who is selected by other members of the loan syndication to act as a head in performing procedures of the loan syndication operation.

6. Head member in payment shall mean the member who is selected by other members of the loan syndication to act as a head in the disbursement, debt collection and other payment operations relating to the provision of loan syndication for the project.

7. Head member in receipt of secured assets shall mean the member who is selected by other members of the loan syndication to act as a head in the receipt and management of secured assets for the loan syndication provided to the customer.

8. Foreign credit institutions shall mean the credit institutions that are established in foreign countries in accordance with applicable laws of foreign countries.

9. Loan syndication contract (hereinafter referred to as syndication contract) shall mean a written agreement among members participating in the loan syndication to undertake to provide loan syndication to the customer.

10. Contract of loan syndication to customer (hereinafter referred to as loan contract) shall mean a written agreement on the provision of loan by the loan syndication party to the customer.

11. Credit outstanding of members participating in the loan syndication shall mean the actual credit outstanding of each member to the customer, which is determined at a certain time. Credit outstanding of the credit institution that is a member of the loan syndication shall be summarized and counted in the total credit outstanding of the credit institution and be treated as a basis for calculating prudential ratios of the credit institution.

Article 3. Principles of providing loan syndication

1. The provision of loan syndication is performed on the basis of the voluntary participation of members, in the principle of co-appraisal, co-deciding to extend credit to the customer and joint responsibility for the result of the credit extension.

2. Members in the loan syndication shall contribute capital (or obligation) in proportion with the participation ratio as provided for in the syndication contract, and be entitled to benefits (applicable interest and fees) and share expenses, risks that may arise as prescribed in the syndication contract.

3. The head member in the provision of loan syndication may act as a head member in the arrangement of loan syndication, head member in the payment, head member in the receipt of secured asset. A cooperative bank, People's credit fund and a finance company shall only be authorized to act as a head member in the provision of loan syndication, head member in the payment in the event where these entities all syndicate their capital for extending credit to the project. Foreign credit institutions, where participating in the loan syndication, shall not be authorized to act as a head member in the provision of loan syndication, head member in the payment and head member in the receipt of secured assets.

4. Members shall be responsible for performing the assigned duties and receive compensation from the performance of duties that are authorized by other members.

5. The loan syndication for a specific operation shall be based on provisions of this Circular and regulations applicable to such specific operation.

Article 4. Forms of loan syndication

1. Loan syndication

2. Guarantee syndication

3. Discount syndication

4. Finance leasing syndication

5. Factoring syndication

6. Syndication for the combination of above said forms of credit extension.

7. Syndication for other forms of credit extension.

Article 5. Cases where loan syndication is applied

1. Demand for credit for realization of project of the customer exceeds the credit limit of the credit institution as prescribed by applicable laws.

2. Financial capacity and fund resources of the credit institution cannot meet the credit demand of the project.

3. The credit institution has a demand for dispersing risks.

4. The customer has a demand for credit from various credit institutions for the purpose of the project.

5. Credit institutions provide loan syndication to key projects under the direction of the Prime Minister.

Article 6. Currency used in loan syndication

The currency used in loan syndication shall be Vietnamese Dong or foreign currency based on the demand of the borrower for the project realization in conformity with provisions of laws on credit and foreign exchange control.

Chapter II

SPECIFIC PROVISIONS

Article 7. Conditions for participating in loan syndication

Subjects as prescribed in Article 1 of this Circular shall be authorized to participate in the loan syndication where following conditions are fully satisfied:

1. For the member that is a credit institution

a. To be established and operate in accordance with the Law on Credit institutions;

b. To comply with prudential ratios after signing syndication contract, credit contract;

c. Not to break limits on credit extension as provided for in the Law on Credit institutions (including outstanding of loan syndication to the customer in which the credit institution, foreign bank's branch expect to participate).

2. For the member that is a foreign credit institution

a. To be established in accordance with laws of a foreign country.

b. To comply with regulations on loan syndication in line with this Circular, regulations on investment, lending, foreign exchange control and other applicable regulations.

3. For the case where the loan syndication has the participation of foreign credit institutions, the customer shall be required to register for foreign loan; open and use an account of foreign loan and debt repayment and observe provisions of laws relating to foreign loan and debt repayment.

Article 8. Proposal for loan syndication

1. After receiving application file for credit of the customer, the credit institution shall proceed with appraising the file, the feasibility and application for credit of the customer.

2. In the event where it is necessary to provide loan syndication to the customer, the credit institution shall issue an invitation for loan syndication, enclosing with related documents and send to credit institutions, foreign credit institutions that are expected to be invited to the loan syndication.

Article 9. Procedures for arrangement of loan syndication

1. Based on the invitation of the credit institution that is the head member in the arrangement, the invited credit institution shall review and provide official reply in writing to the arranging credit institution as to acceptance (to state clearly the maximum amount to be contributed) or refusal of participating in the loan syndication.

2. If the number of participating credit institutions and committed credit amount of the participating credit institution has not satisfied the requirement of the project, the credit institution that acts as the head member in arrangement may issue invitation letters to other eligible institutions to participate in.

3. Based on the reply of the invited institutions, the credit institution that acts as a head in the arrangement shall consider the number of members to participate in the loan syndication and convoke a meeting of members for discussing matters relating to the provision of loan syndication.

Article 10. Appraisal and decision on the provision of loan syndication

1. Members shall agree on the form of appraisal for the project of loan syndication, ratify the appointment of representative for co-appraisal and authorize the head credit institution in the credit extension or hire an external appraiser of the third party.

2. Appraisal expenses shall be agreed upon by the members and made in writing.

3. Based on the final appraisal result, the members shall consider and make decision on the proportion of loan syndication, inform the head member in the arrangement of loan syndication and take self-responsibility for their decision.

Article 11. Syndication contract

1. On the basis of the notice from the members, the head member in the arrangement shall convene a members' meeting for the purpose of the syndication contract.

2. A syndication contract shall be required to comply with provisions of laws on civil contracts, on the credit activities, provisions of applicable laws and to contain following main contents:

a. Name, address of members participating in the loan syndication;

b. Name of the customer, project and main information of the project;

c. Head member in the provision of the loan syndication;

d. Head member in the arrangement of the loan syndication, if any;

dd. Head member in the payment, if any;

e. Head member in the receipt of secured assets, if any;

g. Form of credit extension, total amount of the loan syndication; participation proportion of the members in the provision of loan syndication to the project; entitled interest amount of each member and expenses arising in granting loan syndication in accordance with provisions of applicable laws;

h. Method of disbursement, collection of principal and interest debt;

i. Secured assets and management of secured assets; regime on the disposal of secured assets where the customer is in default.

k. Compensation for head members, if any;

l. Rights and obligations of members and head members;

m. Method of dealing with risks during the process of granting loan syndication, settlement of disputes arising among the members participating in the loan syndication;

n. Inspection regime during and after granting loan syndication;

o. Regime on the supply of information for the grant of loan syndication;

p. Agreement on the appointment of member acting as the representative of finance leased asset's owner to the customer in the finance leasing syndication operation;

q. Other agreements.

3. In the event where a member breaks the syndication contract, the other parties shall be entitled to take legal action against the violating member in accordance with provisions of applicable laws.

Article 12. Credit contract

1. The credit contract shall be concluded by the participating members or otherwise they may authorize the head member in the grant of loan syndication to act as a representative of the credit extender and sign the contract with the customer.

2. The credit contract shall be conformable to provisions of laws on civil contracts, credit activities, provisions of applicable laws and specify rights and obligations of the Loan syndication provider and the customer. The credit contract shall be made in various copies, 01 of which shall be kept by the customer and each member.

Article 13. Secured assets in the loan syndication

1. The members shall agree and decide on the form of security with or without assets in line with provisions of applicable laws.

2. The members shall agree on the appointment of representative or authorize the head member who receives secured assets to represent for the loan syndication provider in management, supervision and disposal of secured assets for the credit facility in accordance with provisions of applicable laws.

3. The members shall be entitled to receive the principal amount and be obliged to pay for the arising expenses in proportion with the syndication ratio in case where the loan syndication provider disposes the secured assets for debt collection. These expenses shall be agreed and specified in the syndication contract and credit contract.

Article 14. Head in the payment and performance of payment operation

1. The head member in the payment shall be responsible for gathering fund from the members, disbursing, debt collection (including principal and interest) and performing other operations relating to the provision of loan syndication to the project.

2. The head member in the payment shall be responsible for following up and timely notifying other members of information relating to payment transactions of the loan syndication provider to the customer; asking the customer and other members to timely transfer money for the purpose of the payment transactions; transferring amounts of money legally entitled by the members.

Article 15. Inspecting the credit facility and procedure of risk settlement in the loan syndication

1. Members in the loan syndication shall follow up and inspect the credit facility in the forms of alternation, appointing a representative or authorizing the head member in the provision of the loan syndication.

2. Upon finding out that the customer commits an act of violating the credit contract, it is required to immediately inform other members for agreement on the settlement.

3. The loan syndication provider shall be entitled to take legal action in accordance with provisions of applicable laws in case where the customer breaks the credit contract.

Article 16. Information and reporting regime

1. The customer shall be responsible for reporting the head member in the grant of loan syndication on the using progress of the credit fund and necessary reports and information upon request of the head member in the provision of the loan syndication. The customer shall also be responsible for the legality and accuracy of information supplied by him.

2. The head member in the provision of loan syndication shall be responsible for supplying information about the customer and the project granted with loan syndication to other members in line with provisions in the syndication contract.

3. The head member in the grant of loan syndication shall be responsible for reporting the State Bank on the performance of loan syndication in accordance with the Appendix enclosed with this Circular.

Chapter III

IMPLEMENTATION ORGANIZATION

Article 17. Transition provisions

For co-finance contracts, loan syndication contract in respect of other forms of credit extension that are signed before the effective date of this Circular, they shall continue to be implemented in line with the signed agreements until the expiry of the contract. Any amendment of, supplement to the above mentioned contracts shall only be performed if the amended, supplemented contents are in conformity with provisions of this Circular.

Article 18. Implementation effectiveness

This Circular shall be effective from 15 December 2011 and replace the Decision No.286/2002/QD0NHNN dated 3 April 2002 of the Governor of the State Bank on the issuance of the Regulation on co-financing of credit institutions; the Decision No.886/2003/QD-NHNN dated 11 August 2003 of the Governor of the State Bank on the amendment, supplement of the Regulation on co-financing of credit institutions issued in conjunction with the Decision No. 286/2002/QD-NHNN dated 3 April 2002 of the Governor of the State Bank; the Circular No. 08/2006/TT-NHNN dated 12 October 2006 of the State Bank on guiding the activity of finance leasing syndication of finance lease companies in accordance with provisions of the Decree No. 16/2001/ND-CP dated 2 May 2001 of the Government on the organization and operation of finance lease companies and the Decree No. 65/2005/ND-CP dated 19 May 2005 of the Government providing for the amendment, supplement of several articles of the Decree No. 16/ND-CP dated 2 May 2001 of the Government.

Article 19. Implementation organization

Director of the Administrative Department, Director of the Credit Department and Head of units of the State Bank; General Manager of State Bank's branches in provinces, cities under the central Government's management; Chairman of the Board of Directors, Chairman of the Board of Members and General Director (Director) of credit institutions, foreign bank's branches, foreign credit institutions participating in the loan syndication and the customers shall be responsible for the implementation of this Circular.