Vietnam: Vietnam tightens conditions for offshore loans

Vietnam: Vietnam tightens conditions for offshore loans

In brief

The State Bank of Vietnam (SBV) released a draft circular on conditions for enterprises’ offshore loans without government guarantee (“Draft Circular“), which aims to replace Circular No. 12/2014/TT-NHNN dated 31 March 2014 (“Circular 12“). The Draft Circular tightens the control on offshore loans to tackle the risk of excess national foreign debt quota and to promote the onshore loan market. Borrowers are now expected to meet additional conditions to borrow offshore loans without government guarantee.

Notable points of the general and specific conditions applicable to borrowers under the Draft Circular are as follows:

  1. General conditions:
    • Appointing an onshore enforcement agent with regards to Vietnamese-located collaterals;
    • Imposing  a ceiling on borrowing costs applicable to offshore loans; and
    • Using foreign currency derivatives to hedge exchange rate risk.
  2. Particular conditions:
    • Changes to loan purposes;
    • Imposing a borrowing limit applicable to an enterprise; and
    • Imposing a borrowing limit applicable to credit institutions and foreign bank branches.

Further details regarding these are addressed in the client alert here, along with other new additional points of the Draft Circular.

Click here to read the full alert.

Oanh H. K. Nguyen

Oanh Nguyen is a partner in Baker McKenzie Vietnam and has been practising capital markets, banking and finance, M&A, and commercial law for more than 25 years. Knowledgeable about all aspects of investments, she advises on all types of transactions, ranging from investment structures to project structures and their related financing. She has focused on public M&A matters, including major IPOs and projects finance.

Oanh is a respected presenter in the areas of finance and capital markets. In addition, she has lectured at the Ho Chi Minh City Bar Association. She also serves as a legal advisor to the Capital Market Committee of Ho Chi Minh City American Chamber of Commerce.