Currently the borrowing of medium- and long-term foreign loans by Vietnamese business establishments (including State commercial banks) in Vietnam is subject to a common registration mechanism. However, as from 15 October 2011 (i.e. the date Circular 18 (as defined below) takes effect), State commercial banks will need to obtain a separate approval from the State Bank of Vietnam (SBV) for a foreign loan and follow a new route of registration of foreign loans.

On 23 August 2011 the SBV issued Circular No. 18/2011/TT-NHNN (Circular 18) guiding foreign exchange control over foreign loans of State commercial banks. State commercial bank means a commercial bank established and operating in accordance with the Law on Credit Institutions and in which the State owns above 50% of the charter capital. Foreign loan means a medium- or long-term foreign loan (namely a loan with a term above one year) borrowed by a State commercial bank from a foreign credit institution or foreign financial institution which is not a resident of Vietnam, or a foreign loan borrowed by a State commercial bank in the form of issuing international bonds on the international capital market.

In principle, State commercial banks are only allowed to contract foreign loans upon written approval of the SBV. These banks are responsible for effectively using such loans for the right purpose and bear all the risks associated with the loans. Circular 18 also stipulates guidelines on registration of foreign borrowings and reporting regimes.

Scope and applicability

Circular 18 provides for the principles, sequence and procedures for assessing and implementing the borrowing of non-Government guaranteed foreign loans by State commercial banks.

Circular 18 applies to State commercial banks and to other organisations and individuals related to or involved in the borrowing of non-Government guaranteed foreign loans by State commercial banks.

Prior consent from the SBV to borrowing foreign loans is a must

Prior to entering into a foreign loan agreement or submitting a request for certification of the quota on issuing international bonds, a State commercial bank must directly lodge with the SBV (Department of Foreign Exchange Control) or send to it by post, one set of a file requesting the SBV's consent to borrowing the foreign loan or to the plan on issuing international bonds.

The SBV's consideration and approval of foreign loans or international bond issuance for State commercial banks are based on:

  • their compliance with applicable legislation on prudential ratios;
  • the total value of loans or bonds falling within the total national foreign debt limit approved annually by the Prime Minister;
  • provisions of the foreign loan agreement or contents of the plan of international bond issuance not being contrary to applicable law; and
  • their satisfaction of legal requirements of foreign exchange control, foreign debt control, and other relevant legal requirements.

The SBV must, within 15 working days from receipt of a complete and valid file from a State commercial bank, provide written consent or non-consent to a foreign loan or to a plan on issuance of international bonds.

Upon obtaining the SBV's approval on the plan for the international bond issue pursuant to Circular 18, the issuing bank must follow the procedure for obtaining the certification of the quota and registration of the international bonds value in accordance with the SBV's guidelines on foreign exchange control applicable to issuance of international bonds (i.e. Circular 19/2011/TT-NHNN of the SBV dated 24 August 2011 which takes effect on 15 October 2011).

Registration of foreign loans and of changes in foreign loans

After obtaining the SBV's consent, the State commercial bank will sign the foreign loan agreement and other relevant documents. Within 30 days after signing such loan agreement and before the drawdown date of a first loan, the State commercial bank must directly lodge at the SBV or send to it by post, one set of a file requesting registration of the foreign loan. The SBV will accept the registration of a foreign loan for the State commercial bank within 5 working days from the date of receipt of a complete application file.

If there is an agreement to amend the foreign loan agreement which is not contrary to current law and which retains or reduces the loan quota, then the State commercial bank must sign an amendment agreement and register it pursuant to current regulations on management and repayment of foreign loans borrowed by enterprises (i.e. Circular 09/2004/TT-NHNN of the SBV dated 21 December 2004).

If the amendment is to increase the registered foreign loan value, then the State commercial bank needs to seek a new approval from the SBV on the proposed adjusted foreign loan value followed by registration of the amendment with the SBV.

Periodical reporting

State commercial banks must, on a monthly and annual basis, make a report to the Provincial/Municipal State Bank branch in the locality where the former has its headquarters, on the status of borrowing foreign loans, and send a copy to the SBV (Department of Foreign Exchange Control).


Circular 18 will take effect as from 15 October 2011.

Any foreign loan borrowed by State commercial banks for which registration (including registration of amendments) was made prior to 15 October 2011 will continue to be implemented pursuant to the SBV's registration certificate. For any amendment made after this date, the relevant State commercial bank must be compliant with the provisions of Circular 18.

Any foreign loan agreement signed by a State commercial bank but for which registration is not made prior to 15 October 2011 must be registered pursuant to guidelines of the SBV provided for each specific case.

For inquiries related to this Legal Update, please contact Mai Phuong Nguyen, Cuong Nguyen or your usual contacts with our firm.

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