The Secretary General of the Association of Banks in Lebanon (ABL), Fadi Khalaf, warned against the risks of an unrealistic implementation of the Gap Law in the introduction of the ABL’s January 2026 monthly report.
According to Khalaf, this draft law, which aims to unlock the issue of bank deposits, can only succeed if the liquidity required for its implementation is effectively available. “The text is not a mere statement of intent. Any payment commitment must be feasible, backed by identified resources and a realistic timetable; otherwise, it risks triggering a new crisis of confidence instead of providing a solution,” he stressed.
The financial reality
The report notes that the first four years required for repaying $100,000 to all depositors would need more than $20 billion to be shared between the banks and the Central Bank or Banque du Liban (BDL). However, if the BDL finances its share from banks’ mandatory reserves, few institutions would have sufficient liquidity to meet the original schedule.
The Secretary General warned of the risk that some banks may be unable to honor their commitments after one or two years, while no clear plan exists for institutions that may not survive financially.
Recommended measures
Khalaf highlighted several key points. A liquidity stress test must be implemented to assess actual capacities before setting repayment ceilings or timelines. Furthermore, contingency plans must account for potential failures. Ignoring such tests could cause the plan to collapse midway, as the law’s credibility depends on honoring commitments.
The State’s fulfillment of its obligations toward the BDL is crucial to the plan’s viability. If the State does not pay what it owes, the process will become more hypothetical than realistic.
Ensuring the sustainability of the banking sector
Reducing banks’ capital to zero and imposing future burdens on shareholders would eliminate any incentive for recapitalization. Rehabilitating the banking sector requires a balance between restoring depositors’ rights and ensuring the sector’s sustainability as an essential financing channel and partner in economic growth. Weakening or dismantling the banking sector would not serve depositors’ interests and would prevent any repayment.
Khalaf concluded that the success of the law depends entirely on taking liquidity and these corrective measures into account. Without them, the text would lead to a new default rather than provide a framework for restoring depositors’ rights and stabilizing Lebanon’s banking sector.
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