Presented as a restructuring measure, the Gap Law organizes a methodical liquidation of the Lebanese banking sector. Behind complex technical mechanisms—loss hierarchy, balance-sheet cleanup, recapitalization—lies a clear political choice: to sacrifice banks to settle a public crisis that the state refuses to assume.
This text does not reform the banking system. It programs its collapse.
Banks: An Economic Pillar, Not a Scapegoat
In any modern economy, the banking sector performs an essential function:
collecting savings,
financing investment,
ensuring the circulation of credit.
Without sound banks, there is no growth, job creation, or sustainable recovery.
In Lebanon, banks played—sometimes excessively—the role of state financier, within a regulatory and prudential framework defined by Banque du Liban and validated by public authorities. They did not set fiscal policy, decide on sovereign default, or impose destructive monetary choices. Yet the Gap Law designates them as the first absorbers of losses, even before any real contribution by the state.
A Politically Oriented Loss Hierarchy
Technically, the Gap Law applies a classic hierarchy: shareholders, then banks, then depositors.
Politically, it distorts its very spirit.
The text provides for the near-total annihilation of bank equity, without serious differentiation between viable and non-viable institutions. This blanket approach deliberately ignores the diversity of balance-sheet situations and prevents any selective restructuring.
In practice, this means:
generalized destruction of capital,
elimination of shareholders,
irreversible weakening of bank balance sheets.
Such an approach can only make sense within an orderly framework, where the state subsequently recapitalizes the system. Here, however, no credible recapitalization mechanism is provided.
Recapitalization: A Legal Fiction
The Gap Law requires banks to recapitalize… after having wiped out their equity. Economically, this demand is absurd.
What rational investor would inject capital into a system where:
rules can be changed retroactively?
deposits can be converted by law?
the state refuses to honor its commitments?
the central bank is not obliged to cover its losses?
The answer is simple: none.
Politically, this contradiction reveals the true purpose of the text: it does not aim to save banks but to legitimize their disappearance while ultimately transferring the cost to depositors.
Chain Liquidations: A Deliberate Outcome
The Gap Law explicitly provides for the liquidation of many banks. This liquidation is presented as a technical, regulated, almost neutral process. In reality, it amounts to a systemic failure.
In a context where:
assets are devalued,
capital is wiped out,
trust is destroyed,
Liquidations will not restore deposits. They will merely serve to legally record losses that have already been incurred.
Technically, bank liquidation in a systemic crisis never protects depositors.
Politically, it allows the state and the central bank to absolve themselves of any direct responsibility.
Banque du Liban: Judge and Party
The Gap Law grants Banque du Liban a central role: supervision, validation, liquidation, issuance of securities, and asset management.
Yet Banque du Liban lies at the very heart of the financial imbalance. It is neither a neutral actor nor an external arbiter. By entrusting it with the liquidation of the banking sector, the state allows it to manage the consequences of its own decisions without any real accountability.
From a political standpoint, this raises a major governance issue.
From a technical standpoint, it undermines the credibility of the entire process.
Destruction of Credit, Explosion of Cash
The macroeconomic consequences of the Gap Law are heavy and predictable.
Without solid banks:
credit disappears,
investment collapses,
the economy retreats into cash.
Lebanon is already experiencing massive expansion of the informal economy. The Gap Law institutionalizes it. By destroying banking intermediation, it condemns the country to a survival economy, without structured financing, visibility, or growth.
No liberal economy has ever been rebuilt without a functioning banking system. None.
A Political Choice Disguised as Technical Reform
It would be wrong to read the Gap Law as a purely technical text. It is an explicit political choice, disguised as financial engineering.
That choice is to:
shield the state from any deep restructuring,
preserve its spending and privileges,
sacrifice an already weakened private sector,
make savings pay for public failure.
Banks thus become the ideal scapegoat: visible, unpopular, and politically defenseless.
Defending Banks Means Defending Depositors
In public debate, defending banks is often portrayed as indefensible. This is a serious mistake.
Without banks:
there are no deposits,
there is no credit,
there is no recovery.
Protecting depositors requires preserving a viable banking sector—intelligently restructured, credibly recapitalized, and anchored in a stable legal framework.
The Gap Law does exactly the opposite.
A Law of Liquidation, Not Recovery
Technically inconsistent and politically biased, the Gap Law does not prepare the reconstruction of Lebanon’s banking system. It organizes its disappearance.
By destroying banks, it destroys savings.
By destroying savings, it destroys trust.
And without trust, no economy can recover.
The Gap Law is not banking reform.
It is a law of political liquidation of the financial market.
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