Vietnam’s regulatory framework for debt sale and purchase, codified primarily in Circular No. 09/2015/TT-NHNN (“Circular 09”) and Law on Credit Institutions 2024, establishes strict licensing requirements for credit institutions but creates significant ambiguities regarding non-credit institution lenders and offshore participants in relation to syndicated loan transactions.
When viewed against Vietnam’s commitments under major free trade agreements, these ambiguities become even more problematic, raising questions about regulatory compliance and international treaty obligations.
Debt Sale and Purchase – Derecognition
Under Circular 09, debt sale and purchase means an arrangement for the transfer of a creditor’s right to debt collection arising from the lending or a debt to be paid on a third party’s behalf in the guarantee, whereby the debt seller transfers the ownership of the debt to the debt purchaser and receives a payment from the debt purchaser. The transfer and assignment of the lenders’ loan participations in a syndication will constitute debt sales as prescribed in Circular 09 and the derecognition of the lenders’ financial assets following IFRS 9.
Participation of Onshore Lenders
Vietnamese credit institutions participating in syndicated loans occupy a regulated position under Circular 42/2011/TT-NHNN. Participation itself does not require advance State Bank approval, but the institution must have “debt trading” activities explicitly registered in its establishment and operation license to “step in” and assume the position of exiting lenders.
When a Vietnamese credit institution participates in an offshore syndicated facility (i.e., a loan to a Vietnamese borrower arranged by offshore lenders), it assumes the same regulatory obligations as the offshore participants, the syndication agreement must be registered with the State Bank of Vietnam if it constitutes a medium- or long-term loan (tenor exceeding one year), or a short-term loan that has been extended beyond one year. However, the institution must also separately satisfy Circular 09’s licensing requirements if it subsequently seeks to acquire the syndicated position of another lender.
Participation of Offshore Lenders and FTA Constraint – Missing Explicit Permission
Regulations of Circular 09 leave participants in doubt whether they are obliged to apply for the debt sale and purchase license once they reckon their participation in existing loans with Vietnamese law as the governing law of the transactions.
Vietnam’s major trade agreements – GATS, CPTPP and EVFTA – provide limited clarity on offshore participation in debt trading activities. Vietnam’s specific commitments in financial services are contained in these agreements, but no agreement explicitly permits offshore entities to participate in debt sale and purchase transactions within Vietnam or cross-border to Vietnam.
This omission creates a critical constraint. If an offshore lender participates in a Vietnamese – law – governed syndicated facility and later seeks to transfer its position, it faces two problems. First, Circular 09 does not clearly address offshore entities as debt purchasers in syndication contexts. Second, Vietnam’s FTA commitments do not affirmatively grant permission for such offshore participation, potentially exposing the transaction to challenge as inconsistent with Vietnam’s regulatory framework.
Practical Risk and Compliance Strategy
Market participants should recognize that syndicated loan transfers involving non- credit institutions or offshore purchasers proceed in a regulatory gray zone. Transfers between or to domestic credit institutions licensed to carry out debt trading enjoy the clearest scenario.
Until the SBV clarifies its enforcement approach to non-credit institution participation and offshore transfers, syndicated loan market participants will operate in regulatory uncertainty.
