Earlier this year, the State Bank of Vietnam (SBV) released a draft circular (Draft Circular) replacing circular No. 12/2014/TT-NHNN (Circular 12) on conditions for non-government guaranteed cross-border foreign loans for public feedback. The Draft Circular proposes to tighten the management of non-government guaranteed offshore loans to control Vietnam's overall borrowing exposure. It is unclear when the Draft Law will be approved and promulgated by the competent authorities.
In this update, we set out some notable points of the Draft Circular.
- Cap on Borrowing Costs
Under Circular 12, the SBV Governor may determine a cap on borrowing costs of offshore loans for each interest period. However, to date, the SBV Governor has not made use of this opportunity. The Draft Circular proposes a specific cap on borrowing costs of a foreign loan as below:
- For offshore loans denominated in a foreign currency, the cap will be:
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- Reference interest rate + 8% per annum in case of offshore loans with reference interest rate; or
- SOFR Term Rate + 8% per annum in case of offshore loans without reference interest rate
- For offshore loans denominated in Vietnamese Dong: the Vietnamese Government bond interest rate + 8% per annum.
Download - Requirements For Offshore Loans Without Government Guarantee
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