Effective from July 1st, 2024, the State Bank of Vietnam (SBV) introduced new regulations under Circular No. 19/2024/TT-NHNN. These regulations amend and supplement various Articles of Circular No. 08/2023/TT-NHNN, dated June 30th, 2023.
The new regulations introduce significant changes to the management of offshore loans, impacting both foreign banks and resident letter of credit (LC) applicants.
Offshore Loans for Resident LC Applicants
Resident LC applicants now have the opportunity to apply for offshore loans to finance their LCs under the contract to import goods on deferred payment to serve their implementation of an investment project, a production and business plan, or other projects. When proceeding with these offshore loans, several important characteristics come into play:
- Purpose Alignment: The offshore loan must be for implementing investment projects, business plans, or other projects.
- Exemptions:
- Medium-and-Long Term Loan Limit: These loans are excluded from the medium-and-long-term offshore loan limit.
- Special Account Requirement: There is no requirement for a special account.
- SBV Registration: Registration with SBV is not required.
- Reporting Obligations: Despite the exemptions, reporting the offshore loan to SBV is still required.
Offshore Loans for LC Issuing Banks
The new regulations also address the reimbursement of domestic bank-issued LCs by foreign banks. The following points outline the key elements of this arrangement:
- Eligibility: Debt arising from LCs issued by a domestic bank and reimbursed by a foreign bank qualifies as an eligible offshore loan.
- Plan of Loan Usage: The medium-and-long-term debt from LCs issued by the domestic bank and reimbursed by a foreign bank does not necessitate a plan of offshore loan usage.
- Exemptions:
- Short-Term Offshore Loan Limit: This debt is exempt from the short-term offshore loan limit of the LC issuer.
- SBV Registration: There is no requirement to register the medium-and-long term offshore loan with SBV.
- Prudential Ratio Compliance: The LC issuer must comply with the prudential ratio requirement for three consecutive months prior to the date of the offshore loan agreement. Additionally, the issuer must adhere to other FX control regulations, including reporting obligations, special account requirements, and fund flow controls.
Fidinam can help
Understanding and navigating these new offshore loan regulations can be complex and challenging.
Our team of experts is ready to assist you in ensuring compliance and leveraging these regulatory changes effectively.
For support with offshore loan management, contact us today for tailored guidance and expert assistance. Please use the form below or email info@fidinamgw.com.