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3. Central Bank of Lebanon’s Governor Proposes a Specialized Body for Bank Restructuring

The subcommittee of the parliamentary Finance and Budget Committee, chaired by MP Ibrahim Kanaan, continues its review of the draft Banking Sector Restructuring Law. The discussions are centered on resolving divergences between the government's proposal, the IMF’s recommendations, and the proposals presented by Central Bank of Lebanon’s (BDL) Governor Karim Saïd—particularly regarding the independence of the High Banking Commission and the implications this has on the structure and powers of this body.

Governor Saïd remains unwavering in his defense of the Central Bank’s independence, emphasizing that any restructuring must comply with Lebanon’s legal framework, particularly the Code of Money and Credit, which protects BDL’s authority and its Governor. This comes as Prime Minister Nawaf Salam’s team pushes forward with suggestions that would significantly curtail the Central Bank’s powers and autonomy.

The Banking Sector Restructuring Law provides for the establishment of a High Banking Commission; however, this government-proposed measure was rejected by the Governor of the Central Bank of Lebanon, Karim Saïd, who considers it a breach of the Central Bank’s authority due to the broad powers granted to the Commission and its members.

As an alternative, Saïd presented a counterproposal to the Finance and Budget subcommittee calling for the creation of a second body—a Specialized Commission for Bank Restructuring—as a practical amendment to the government’s draft, particularly regarding the composition and prerogatives of the High Banking Commission.

Details of the text proposed by the Central Bank’s Governor include the establishment of a Specialized Commission for Bank Restructuring to intervene during any systemic financial crisis. In the rationale for creating such a body, Saïd states that, for the purpose of implementing the provisions of the Bank Restructuring Law in Lebanon and overseeing the reorganization of the banking sector, a new commission should be established within the Central Bank as a decision-making authority for determining which banks should be subjected to restructuring or liquidation.

This commission would be activated under specific circumstances, namely:

• Bank restructuring in response to the ongoing systemic crisis in Lebanon since 2019.

• Future systemic crises involving multiple banks.

The commission would be composed of the five following voting members:

• The Governor of the Central Bank (as Chair)

• The President of the National Deposit Guarantee Institution, or a designated board member

• A judge with expertise in banking, financial, and insolvency matters (appointed by decree with approval from the Supreme Judicial Council)

• A lawyer specialized in financial, banking, and/or insolvency law (appointed by Cabinet decree from a shortlist of three candidates submitted by the Central Bank, based on a list of five names proposed for this purpose by the Beirut Bar Association)

• A financial auditor/accountant with expertise in forensic accounting or auditing (appointed by Cabinet decree from a list of three candidates proposed by the Minister of Finance)

The lawyer and accountant would serve five-year terms, renewable as needed.

The Chair of the Banking Control Commission (BCC) — or a designated representative — shall attend the meetings of this body in an oversight capacity to provide clarifications regarding proposals submitted by the BCC in relation to its reports addressed to the head of the authority.

In addition to the five voting members, the authority shall also include a financial, banking, or economic expert — Lebanese or foreign, a natural or legal person — appointed by the Central Council of the Central Bank of Lebanon. This expert may attend the meetings of the Authority for Bank Restructuring, but shall not have voting rights, nor be counted in quorum or majority requirements. The expert may provide an opinion on matters under discussion, but such opinion shall not be binding on the authority.

The proposed authority must provide written justification for all its decisions. It must also adhere to a set of criteria to ensure the independence of its members and prevent conflicts of interest. No member may have been a shareholder in the concerned bank or a related institution within ten years prior to appointment; nor may they have served on the board, held a senior executive position, or acted as a consultant to the bank or any related institution during that period.

Additionally, no member may hold a loan exceeding $100,000 from the concerned bank or related institutions; have deposits exceeding $100,000 with the same entities; nor be a close relative (up to the second degree) of a major shareholder, large depositor, or senior official within the bank or related institutions. Other relevant criteria may also be applied where there is a risk to independence, whether direct or indirect.

The authority shall convene upon request by its Chair or at least three of its members, particularly when a BCC report is received concerning the liquidation or restructuring of a bank. The Chair sets the agenda, and meetings are deemed valid with the presence of at least three members. Decisions are made by majority vote of those present; in case of a tie, the Chair holds the casting vote.

Deliberations of the authority shall remain confidential, and decisions may only be disclosed through official reports or resolutions signed by the Chair. The Central Bank of Lebanon’s Governor chairs the authority’s meetings and represents it with third parties. If he is unable to preside, a Deputy Governor chosen by the Governor himself shall act in his place.

According to the proposal submitted by Governor Karim Saïd, the authority may establish a dedicated secretariat with defined roles and responsibilities. It may also draw on Central Bank of Lebanon staff to support its work through a specialized unit created for this purpose.

All eyes are now on the upcoming sessions of the Bank Reform Committee. According to informed sources, a team surrounding Prime Minister Nawaf Salam is working to curtail the powers of the Central Bank and its Governor — particularly by insisting on expanding the authority and prerogatives of the Higher Banking Commission, while rejecting Saïd’s proposals. Saïd maintains that the government’s draft contravenes the core principles of the Code of Money and Credit and undermines the Central Bank’s independence. Some behind-the-scenes discussions have even pointed to efforts to redistribute sectarian and political influence within institutional structures, particularly in light of Saïd’s governorship, as he is unaffiliated with any political faction.