The State Bank of Vietnam (SBV) on October 3 issued Circular No. 28/2012/TT-NHNN, on bank guarantee by credit institutions and foreign bank branches.

Accordingly, subject to the new regulation are credit institutions (commercial banks, cooperative banks and finance companies); foreign bank branches; the Central People’s Credit Fund; and related organizations and individuals.

Regarding foreign exchange management in bank guarantee, it is stipulated in the Circular that the issuance of foreign-currency guarantees by credit institutions and foreign bank braches must be in line with their scope of foreign-currency business and service provision in the domestic and foreign markets.

They may provide foreign-currency guarantees to resident organizations and individuals for lawful transactions with foreign-currency payments.

Guarantors may commit to guaranteeing part or the whole of the following obligations of the guaranteed: (i) the obligation to pay principal, interest and other expenses related to the loan; (ii) the obligation to pay for purchased materials, goods, machinery, equipment and other expenses for implementation of projects or plans on investment, production, business or services; (iii) the obligation to pay taxes, fees, and other financial obligations to the State; (iv) the obligation to participate in bidding; (v) the obligation to perform contracts, assure product quality and refund advanced amounts; and (vi) other lawful obligations as agreed by the parties.

This Decree will take effect on December 2, 2012, and replace Decision No. 26/2006/QD-NHNN of June 26, 2006.-