As the State Bank of Vietnam is gathering comments on a draft amending Circular 12 on eligibility requirements for unguaranteed firms to take out foreign loans, the Vietnam Chamber of Commerce and Industry has suggested several modifications to the document.

The draft requires borrowers which are not credited institutions or branches of foreign banks to inform the authorities about all their business activities when applying for a foreign loan. VCCI believes full disclosure is unnecessary and suggests the borrowers be required to disclose only those business activities that are relevant to the loan.

The draft also requires borrowers to inform the authorities about their outstanding foreign loans and show that they qualified for the loans at the moment they were granted to them.

The VCCI suggests the requirement should be removed to avoid repetitive procedures since creditors granted loans only to qualified borrowers.

Under the draft, loan expense means the total expense expressed as an annual percentage of the loan. It includes interest payments and other expenses that borrowers must pay to their creditors, guarantors, insurers, agents and relevant parties.

The draft sets expense ceilings for foreign loans to keep the loans in check, reducing financial risks. However, the VCCI believes credit institutions and branches of foreign banks, as borrowers, should be exempt from the expense ceilings because loan expenses incurred by them are normally low.

The chamber suggests they should be allowed to negotiate with their creditors on loan expenses as long as the negotiation aligns with the Law on Credit Institutions and other relevant regulations.

Sometimes creditors require additional expenses from their borrowers, such as contract management fees when loan contracts have been concluded. In that case, borrowers have no choice but to re-negotiate with their creditors to adjust the loan expenses specified in their initial contracts.

The VCCI calls for additional articles regulating the contracts if loan expenses are adjusted up past the expense ceilings, thereby plugging a legal gap in the draft.

It also calls for additional articles to deal with the cases when creditors find their borrowers miscalculate loan expenses. The articles are expected to hold borrowers accountable for their calculations since different calculating methods normally come with other figures. — VNS