Foreign banks located outside of Vietnam extending cross-border loans to borrowers in Vietnam should be aware of the following:
Under WTO commitments, Vietnam gives an “unbound” commitment regarding cross-border lending services. The Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) also does not open for cross-border lending services. This means that the Vietnamese Government has discretion to allow or disallow cross-border lending;
Under the Credit Institutions Law 2010, a foreign lender, who lends to Vietnamese borrower repeatedly and continuously manner, may be viewed as providing banking services in Vietnam and require a banking license from the State Bank of Vietnam (SBV);
A Vietnamese entity borrowing loans from a foreign lender is subject to certain requirements including but not limited to registration or report of offshore loans with the SBV. Accordingly, if a foreign loan is registered or reported to SBV, the SBV should find it difficult to reject such loans later on the ground that the foreign lender needs a banking licence in Vietnam; and
As a matter of practice, Vietnam as a capital importing country will need foreign financing for a long time to come. Therefore, the risk of banking license due to cross-border lending activities is theoretical and could only become real when local banks finds that foreign lenders providing cross-border loans are their competitors.
This post is contributed in part by Le Minh Thuy, a trainee at Venture North Law.