Regulations on Credit Guarantee Companies

信用担保公司规定

ຂໍ້ຕົກລົງວ່າດ້ວຍ ບໍລິສັດຄ້ຳປະກັນສິນເຊື່ອ

Summary

This regulation governs the establishment, operation, and supervision of credit guarantee companies, focusing on regulating their business licenses, risk management, and guarantee services to promote SME financing and financial stability.

Articles

Article ມາດຕາ 1

Article 1 Purpose
This agreement sets forth principles, regulations, and measures regarding the licensing, operation, management, and monitoring of credit guarantee companies to ensure their operations are correct and sustainable, aiming to create conditions for the development of financial infrastructure, facilitate access to capital for individuals, legal entities, or enterprises, especially micro, small, and medium enterprises, and contribute to the national socio-economic development.

Credit guarantee companies are financial institutions established in accordance with the law.

Article ມາດຕາ 2

Article 2 Credit guarantee company means a company that engages in credit guarantee business and is licensed to provide credit guarantee services as stipulated in this agreement.

Article ມາດຕາ 3

Article 3 Definition of Terms
Terms used in this agreement shall have the following meanings:

1. Credit guarantee service means the service of guaranteeing the performance of obligations of a borrower to a creditor which is a registered financial institution, by issuing a credit guarantee letter to such financial institution to ensure that the credit guarantee company will repay the debt on behalf of the guaranteed borrower in the event that such borrower is unable to repay the debt to that financial institution as stipulated in the contract;

2. Registered financial institution means a financial institution under the supervision of the Bank of the Lao PDR which has registered with a credit guarantee company to become a financial institution eligible to apply for guarantee under the conditions set by the credit guarantee company;

3. Borrower means a person or legal entity that has obtained credit from a financial institution and has an obligation to repay the debt as stipulated in the contract;

4. Credit means loans and financial obligations;

5. Loan means money lent by a financial institution in the form of general loans, overdrafts, advances, and other types of loans as determined by the Bank of the Lao PDR;

6. Financial obligation means a contractual obligation entered into by a financial institution with a customer in the form of: credit line, letter of credit, guarantee letter, payment guarantee letter, and others as determined by the Bank of the Lao PDR;

7. Manager means a member of the board of directors, a member of a committee of the board of directors, the management board, department heads, division heads, and branch heads;

8. Related borrowers means two or more borrowers that are related as follows:
- One of those borrowers has control over the other borrower;
- The same person has control over both or all borrowers;
- The source of funds for debt repayment is the same for both or all borrowers;
- The borrowers have close internal relationships such that if one borrower experiences financial difficulties, the other borrower(s) or all may experience the same problem.

9. Control means the power of a person or legal entity over an enterprise as follows:
1) Holding directly or indirectly fifty percent or more of the voting shares of such enterprise;
2) Being able to elect a majority of the members of the board of directors or equivalent of that enterprise;
3) Having the power to control the decisions of management or the policy-making of the company;
4) Being able to order or direct a majority of the board members or shareholders holding fifty percent or more of the voting shares of that enterprise to act according to its wishes in conducting the business of that enterprise.

10. Tier 1 capital means the core capital used as loss-absorbing capital of a credit guarantee company as determined by the Bank of the Lao PDR.

11. Fit and proper person means any person whose history demonstrates honesty, trustworthiness, fairness, integrity, sound judgment, and who possesses appropriate professional qualifications, competence, and experience for the relevant management position, major shareholder, or as determined by the Bank of the Lao PDR.

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