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Earlier this year, the State Bank of Vietnam (SBV) published a draft circular (Circular project) replacing Circular No. 12/2014/TT-NHNN (Circular 12) on the conditions applicable to cross-border non-state guaranteed foreign loans for public comment. 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 bill will be approved and enacted by the relevant authorities.
In this update, we outline some notable points from the draft circular.
- Ceiling on borrowing costs
Under Circular 12, the Governor of the SBV may set a cap on borrowing costs for offshore loans for each interest period. However, to date, the governor of the SBV has not made use of this possibility. The draft circular proposes a specific cap on the borrowing costs of a foreign loan as follows:
- For offshore loans denominated in a foreign currency, the ceiling will be:
- Reference interest rate + 8% per annum in case of offshore loans with reference interest rate; Where
- SOFR Term Rate + 8% per year in case of offshore loans without reference interest rate
- For offshore loans denominated in Vietnamese dong: Vietnamese government bond interest rate + 8% per annum.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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