Global Trade Alert

One 31 March 2014, the State Bank of Vietnam (SBV) issued Circular No. 12/2014/TT-NHNN stating the conditions for foreign loans taken by enterprises that do not have government guarantees. The Circular amends and supplements an earlier 2004 circular with the following rules:

• Foreign loans may not exceed the value of a firm's capital.
• In addition to loan in foreign currencies, foreign loans in Vietnamese Dong has been allowed for specific cases.
• Short-, medium- or long-term loans taken by credit institutions or branches of foreign banks have to comply with the safety ratio provisions, unless these requirements have been waived off by the Prime Minister of Vietnam or the Governor of SBV.
• Further, the foreign short-term loans are to be used only to supplement short-term credit capital.
• Medium- and long-terms can now be availed more easily by state owned enterprises and they will only need a written approval from a state authority
• Several restrictions have been specified for loans taken by enterprises that are not credit institutions or branches of foreign banks or state owned enterprises 
• The Circular authorizes the SBV Governor to intervene and decide ceiling costs of overseas borrowings.

 
The Circular took effect on 15 May 2014.