- 27
- Dec.
- 2023
For the past four years, this somewhat recurrent idle tune has echoed in nearly every opinion, critique and analysis regarding the performance of banks at the outset of the economic crisis. According to these endless rantings, the banks allegedly transferred massive sums of money abroad for a select few privileged individuals, while denying the bare essentials to the less fortunate ones.
Essentially, this action is not only possible but even quite likely. But the narrative woven around this issue has grown to great proportions and shifted into a full-fledged tale that includes the crows and foxes and is further compounded by a twist of political cicadas. Let's attempt to bring the matter back into focus, as it has taken over every inch of our space, including our local grocer whose sales have been dealt a serious blow. Let’s break it down into ten concise points.
1. To begin with, a peculiar term has been used to describe this phenomenon: the deposits have been "leaked" abroad. This draws a somewhat inappropriate parallel to human trafficking in Somalia. It's important to note that, with the absence of a capital control law, all transfers have been and continue to be legal. Granted, the transfers lacked moral fairness. Nevertheless, it should be highlighted that politicians are definitely the last people who should give lessons in morality.
2. Moreover, it is important to avoid generalizing. We all know that some banks were more lenient than others. This is why, before making any false judgment, we must wait for the audit on banks as stipulated in the agreement with the International Monetary Fund (IMF), in line with the promise that has been made for years. But you know what they say about promises …
3. Even the financial prosecutor, Ali Ibrahim, Nabih Berri’s judicial subordinate, was powerless. In February 2020, he summoned the CEOs of the country's major banks to inquire about these "leaks." However, it turned out to be mostly an act of intimidation, as they opposed the default on the debt, which ended up happening a few days later.
4. Let’s move on to the amounts thus transferred: here, there is no consensus either, as many different figures have been put forth, both logical and whimsical. There is an unshakable rule in this country that states the following: in the absence of established figures—as is often the case—fertile ground is fostered for people’s fantasies to roam freely.
5. The former Governor of the Lebanese Central Bank (BDL) put forth a figure of USD 2.6 billion, a portion of which represents fiduciary deposits from corresponding banks and is therefore inherently recoverable. The former General Director of Finance went even further, suggesting a sum of USD 6 billion. Taking advantage of this populist opportunity, some politicians tossed around even more whimsical figures. But overall, these numbers would account for 3% to 4% of private dollar deposits, hardly enough to trigger a financial crisis. Moreover, as it often involves rich people, we're probably looking at less than one percent of depositors who got lucky.
6. It's important to clarify in this context that such transfers were commonplace during specific crises, such as Rafic Hariri’s assassination, the 2006 war or Saad Hariri's detention in Riyadh. On such occasions, a few billion could have leaked, but later returned once the storm dwindled. It became somewhat of a banking routine in a country prone to recurring political turmoil. This time around, the problem is that unrest has persisted, and the funds never found their way back.
7. There is very little information regarding the identity, category or motives of these transfers’ recipients. Were they politicians, bankers, businessmen or regular men providing for their families? Were these depositors extremely well-off or just doing fairly well? What were the real purposes of these transfers? To secure a safe haven, deal with medical emergencies, establish a business, pay off foreign taxes or make payments for a mortgage? It's probably a combination of all the above, the proportion of which remains unclear.
8. Furthermore, an essential aspect eludes these staunch anti-banking supporters: banks have no real interest in transferring deposits abroad, as it would weaken their foreign currencies liquidity. They might have done so at some point. In which case, they did it in a restrained way, perhaps under pressure, due to vital needs, or just to protect their reputation. All the while hoping that this money would come back somehow, once the presumably temporary unrest subsided.
9. Anyhow, the requests to return these leaked amounts have been ongoing ever since the beginning of this four-year saga, which has kept unfolding further and further. However, getting back these huge sums seems unrealistic for many reasons: the transferred funds may have been used for investments, tax payments or healthcare reasons. Furthermore, even if for whatever reason some amounts are brought back, they still rightfully belong to their original owners. As such, they cannot be used to reimburse other depositors. Both new and current depositors will be subject to the same regulations (151, 158, etc.).
10. Ultimately, regardless of foreign transfers, the one factor that is disrupting the system is the bank run, a phenomenon witnessed in numerous cases across both affluent and less affluent nations. Recent examples include Silicon Valley Bank in the USA and Credit Suisse.
However, this whole scenario would never have unfolded had a capital control law been properly adopted from the beginning. The bill was submitted early on to Parliament, as requested by both the Governor of the BDL and the banks.
While awaiting the approval of this law, in November 2019, the Lebanese Banks Association (ABL) urged the banking institutions to "limit foreign transfers to urgent personal needs." This was meant to grant parliamentary committees enough time to end discussions and officially adopt the bill, which the ABL believed was a done deal.
Yet, four years later, the committees are still discussing that same law! Why? Parliament has consistently adhered to a famous saying: never postpone what one can simply choose not to do altogether.
nicolas.sbeih@icibeyrouth.com
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