According to Article 42 of the Government's Decree No. 16/2001/ND-CP of May 2, 2001 on the organization and operation of financial leasing companies, the financial-leasing activities are characterized by medium- and long-term credit activities; the State Bank of Vietnam hereby guides financial leasing companies to make debt-maturity adjustment, debt maturity extension and overdue debt conversion, applicable to financial leasing activities, as follows:

1. Financial leasing companies shall consider and decide on the debt-maturity adjustment, debt maturity extension and conversion of overdue debts of financial-leasing money, applicable to financial leasing contracts with agreement on the lessees' repayment of financial-leasing principals and interests within the same term (principal and interest are aggregated) as follows:

a/ If the financial lessees cannot pay financial leasing debts within the term already agreed upon in the financial-leasing contracts and request in writing the adjustment of debt maturity, the financial leasing companies shall consider and decide on the adjustment of financial-leasing debt maturity. In cases where the lessees do not make written requests for the adjustment of debt maturity, or the adjustment of financial-leasing debt maturity is not approved by financial leasing companies, the financial leasing companies shall convert the whole debit balance amount of actual remaining financial-leasing money of such financial leasing contracts into overdue debts.

b/ If the financial lessees fail to pay up financial-leasing debts within the term of the financial-leasing contracts and make written requests for the debt maturity extension, the financial leasing companies shall consider and decide on the extension of financial leasing debt maturity. The maximum extension shall be equal to half of the financial leasing term already agreed upon in the financial leasing contracts. In cases where the lessees do not make written requests for the extension of debt maturity, or the extension of financial-leasing debt maturity is not approved by financial leasing companies, the financial leasing companies shall convert the whole debit balance amount of actual remaining financial-leasing money of such financial-leasing contracts into overdue debts.

2. Financial leasing companies shall consider and decide on the debt maturity adjustment, debt maturity extension and conversion of financial leasing money into overdue debts, applicable to financial leasing contracts with the agreement on the lessees' repayment of financial leasing debts, including principals and interests with different debt repayment terms as follows:

a/ If the financial lessees cannot repay principals or interests of financial-leasing money within the term already agreed upon in the financial leasing contracts and make written requests for the adjustment of principal or interest debt maturity, the financial leasing companies shall consider and decide on the adjustment of principal or interest debt maturity. In cases where the lessees do not make written requests for the adjustment of principal or interest debt maturity, or the adjustment of financial-leasing principal or interest debt maturity is not approved by the financial leasing companies, the financial leasing companies shall convert the whole actual remaining financial-leasing principal debit balance amount of such financial-leasing contracts into overdue debts.

b/ If the financial lessees fail to pay up principal or interest debts of financial-leasing money within the term of the financial-leasing contracts and make written requests for the extension of principal or interest debt maturity, the financial leasing companies shall consider and decide on the extension of principal or interest debt maturity. The time limit for extension of principal or interest debt maturity shall comply with the time limit for extension of financial-leasing debt repayment, prescribed at Point 1b of this Circular. In cases where the lessees do not make written requests for the extension of principal or interest debt maturity, or the extension of financial-leasing principal or interest debt maturity is not approved by financial leasing companies, the financial leasing companies shall convert the whole actual remaining principal debit balance amount of such financial-leasing contracts into overdue debts.

3. In order to enable the smooth implementation of the above-said regulations, financial leasing companies and financial lessees may reach agreement in the financial leasing contracts that if within 10 working days after the expiry of debt maturity the lessees fail to pay up financial-leasing debts of such term or do not make written requests for the adjustment of debt maturity or debt-maturity extension, the financial leasing companies shall convert the remaining financial-leasing debit balance amount of such financial-leasing contracts into overdue debts.

4. Financial leasing companies shall make debt classification and deductions for setting up risk reserves for the arising overdue debt balance amount according to the regulations of the State Bank of Vietnam.

5. Implementation organization:

a/ This Circular takes effect as from March 15, 2003.

b/ For financial leasing contracts signed before this Circular takes implementation effect, the financial leasing companies shall consult with financial lessees to supplement the regulations on the debt-maturity adjustment, debt-maturity extension and overdue debt conversion in accordance with the provisions of the Circular; in cases where they fail to reach agreement with the lessees, the financial leasing companies may consider and decide on the overdue debt conversion for financial-leasing contracts, where debts cannot be repaid within the prescribed term, for the debt classification and deduction for setting up risk-handling reserves without changing the contents previously agreed upon in the financial-leasing contracts.

c/ The heads of the units under the State Bank; the directors of the State Bank's branches in the provinces and centrally-run cities; the Managing Boards and general directors (directors) of financial leasing companies shall have to implement this Circular.

For the State Bank Governor
Deputy Governor
PHUNG KHAC KE