On October 28, 2022, the State Bank of Vietnam (“SBV”) issued Circular No. 13/2022/TT-NHNN (“Circular 13”) amending and supplementing a number of articles of Circular No. 08 /2021/TT-NHNN (“Circular 08”) dated July 6, 2021 prescribing special lending to credit institutions placed under special control
Special lending is the activity of the lender (the State Bank, Vietnam Deposit Insurance, the Cooperative Bank of Vietnam and other credit institutions) towards the borrower (credit institutions under special control) with the purpose of assisting these organizations when they are at risk of insolvency, threatening the stability of the system.
Regarding the collateral for special loans considered and decided by the SBV, Circular 13 has some amendments and supplements against Circular 08 as follows:
- Reducing conditions but tightening the use of collateral as the debt claim and interest arising from credit grants:
- The borrower will be able to use the security assets as the debt claim and the interest arising from the credits after all other preferred security assets have been used;
- These security assets are not subject to the regulations on value assessment for collateral replacement in case of condition unsatisfaction.
- The only condition applicable to these types of collateral is that the credit must be secured.
- Reduce the conversion ratio of collateral for bonds, debt claims, and interest from credit contracts: Reduce from 170% to 120%.
Given the reduction, the conversion value of the collateral will increase, which means that the loan amount will also increase.
The new contents of Circular 13 represent the SBV’s support for special loans, contributing to solving difficulties of credit institutions under special control and ensuring system stability.
Circular 13 shall take effect from the date of promulgation.
Comment: