Venture North Law Firm

On 30 September 2022, the State Bank of Vietnam (SBV) issued Circular 11 on bank guarantees (Circular 11/2022). Circular 11/2022 will replace Circular 7/2015 of the SBV dated 25 June 2015 (as amended) from 1 April 2023. This post will discuss some notable points of Circular 11/2022.

On 30 September 2022, the State Bank of Vietnam (SBV) issued Circular 11 on bank guarantees (Circular 11/2022). Circular 11/2022 will replace Circular 7/2015 of the SBV dated 25 June 2015 (as amended) from 1 April 2023. This post will discuss some notable points of Circular 11/2022.

1.            Uncertainty of counter guarantee concept

As discussed in our previous update on The Concept of Counter-Guarantee Under Vietnamese Laws, the counter guarantee as defined in Circular 7/2015 may not be considered as a guarantee under the Civil Code 2015 which may results in uncertainty as to the validity and enforceability of the counter guarantee under the Civil Code 2015. This ambiguity remains existing in Circular 11/2022 because the concept of the counter guarantee is kept unchanged under Circular 11/2022.

2.            Improvement in counter-guarantee payment process

2.1.         Article 21.2 of Circular 7/2015 as to the payment process under a counter guarantee suggests that upon receiving a demand from the beneficiary, the guarantor must make payment to the beneficiary first and then seek for the reimbursement from the counter guarantor.

2.2.         In practice the banks in Vietnam normally do not follow this process. Instead, upon receiving a demand from the beneficiary under the guarantee, the guarantor will subsequently submit a claim under the counter guarantee requesting the counter guarantor to make payment and then use such payment to pay to the beneficiary.

2.3.         To address the above gap, the relevant provisions on counter guarantee payment process of Circular 7/2015 have been improved and Circular 11/2022 now officially recognises the process as discussed in 2.2.

3.            Issuing bank guarantees via electronic means

3.1.         Article 9 of Circular 11/2022 clearly allows credit institutions (CIs) and foreign bank branches (FBBs) to issue guarantees using electronic means.

3.2.         Where the CIs conduct know-your-customer (KYC) using electronic means, the guarantee amount is capped at VND 4 billion for individual clients, and VND 45 billion for institutional clients, except for certain specific cases.

4.            Prohibited bank guarantees

4.1.         Circular 11/2022 expands the cases where the issuance of bank guarantees is prohibited. Specifically, similar to Circular 07/2015, Circular 11/2022 does not allow CIs and FBBs to issue bank guarantees to guarantee bond issuers’ bond payment obligation if the purpose of issuing bonds is to restructure their own debts. In addition, if the bond issuance purpose is to contribute capital to or purchase shares of another enterprise, or increase working capital, the issuance of bank guarantee is also prohibited.

4.2.         Circular 11/2022 no longer prohibits a credit institution from issuing a bank guarantee in favour of a bond issuer which is a subsidiary and affiliate of other credit institutions.

5.            More flexibility in issuing guarantees to non-resident customers

5.1.         Under Circular 7/2015, a CI or FBB can only issue guarantees to non-resident institutional customers if the customers have made an escrow (ký quỹ) of full guarantee amount at the relevant CI or FBB. Article 12.1(b) of Circular 11/2022 now allows CIs and FBBs to issue guarantees to these customers if such customers can also provide a security for the whole guarantee amount by using their deposits (tiền gửi) or deposit certificates (chứng chỉ tiền gửi) opened at the same CI or FBB.

6.            Public announcement upon early terminating bank guarantee contract relating to a future formed housing project

6.1.         Article 13.9 of Circular 11/2022 requires that if the bank and the developer agree to early terminate the bank guarantee contract, no later than the next business day, the bank must announcement the termination on its website and send a written notice thereof to the housing management authority of the province where the developer’s housing project is located. Such notice must clearly indicate that the bank will no longer issue a letter of guarantee to any buyer after the guarantee contract is terminated. The bank however is still responsible to continue fulfilling its guarantee obligations with respect to the buyers under the previously issued bank guarantees.

7.            Default governing laws

7.1.         Articles 15.2 and 16.1 of Circular 11/2022 stipulate that the default governing law of a guarantee issuance agreement and a guarantee undertaking is Vietnamese laws if these documents are silent on governing laws. Circular 7/2015 does not include a similar provision. 

8.            Language used in guarantee documents

8.1.         Both Circular 11/2022 and Circular 7/2015 allow guarantee documents to be issued in a foreign language. While Circular 7/2015 generally requires that a foreign language can be used if the guarantee involves foreign elements, Circular 11/2022 lists out three cases where a foreign language can be used as below:

8.1.1.     the guarantee transaction involves foreign elements as defined in the Civil Code;

8.1.2.     the guaranteed obligations arise from executing projects financed by international finance organizations. The list of international finance organizations is stipulated in regulations on prudential limits and ratios for operations of CIs and FBBs issued by the SBV; and

8.1.3.     the guaranteed obligations arise from participating in international contract packages. 

This post is written by Nguyen Thu Giang and edited by Hoang Thi Thanh Thuy.

Please Login or Register for Free now to view all updates and articles

In addition to free-to-view updates and articles, you can also subscribe to the full Legal Centrix Vietnam Service including access to:

  • Overview notes on the law
  • Thousands of high quality translations of legislation covering all key business areas
  • Legal and tax updates
  • Articles on important legal and tax issues
  • Weekly email alerts
  • Sophisticated web platform and search

Legal Centrix is trusted by top law and accounting firms.

Venture North Law Firm

Venture North Law Limited (VNLaw) is a Vietnamese law firm established by Nguyen Quang Vu, a business lawyer with more than 17 years of experience. VNLaw is a boutique professional law firm focusing on corporate, commercial and M&A practices in Vietnam. Our goal is to be an efficient, innovative and client-friendly firm. To achieve that goal, we are designing a working environment and a compensation system which encourage our lawyers to provide more efficient services to clients and to focus on the long term benefit of the firm.

Click here to view the author's profile



  • Vietnam
  • Security Transactions
  • General
  • Legal Updates

Related Content

Recent updates

Cookies On
Our Website
We use cookies on our website. To learn more about cookies, how we use them on our site and how to change your cookie settings please click here to view our cookie policy. By continuing to use this site without changing your settings you consent to our use of cookies in accordance with our cookie policy.