Loads of conflicting information has been circulating about the regulations of Lebanese banks, amidst a systemic crisis, that has shaken the social, economic and financial foundations of Lebanon. A quick review with the General Secretary of the Lebanese Banks Association, to shed some light on the subject. LILIANE MOKBEL
What do you think about the plan recommended by the IMF (International Monetary Fund) as a way out of the current economic crisis?
Fadi Khalaf: The IMF (International Monetary Fund, editor’s note) keeps on reiterating that the Lebanese crisis is an “uunusual” one. However, it has only put forward solutions that were applied in other countries.
What about the deposit recovery Fund submitted by the Lebanese government?
Under this proposal, the major part of the Fund’s financing would be assumed by the banks. This is illogical since it is the State which has wasted nearly 63 billion dollars, namely, a financial gap of 73 billion. Logically, The Lebanese State should take responsibility for 86% of the losses. Otherwise, we would be dealing with a lack of accountability in a country guilty of wasting the depositors’ money, in violation of Article 113 of the currency and credit Code. The law compels the State to cover the losses of the Central Bank.
Some say that the solution to the crisis lies, a priori, in the restructuring of the banks?
We go back to the same controversy: who spent the depositors’ money? The answer is clear: The State did. Bank restructuring is only part of the solution. It can’t lead to a settlement of the crisis if it is not coupled with a radical reform of the public sector. The depositors’ money was squandered to finance the corruption of the public sector. Let’s presume that there is an injection of fresh funds by the banks’ shareholders, these would again be misused as long as the public sector is not reformed.
What about the capital control law?
Today, most banks do not have the required liquidity to pay $1,000 per month ($750 in cash and the equivalent of $250, in Lebanese pounds) to account holders as stipulated in a draft bill. A conceivable measure would be to maintain Central Bank’s circular 158 that provides for paying holders of dollar accounts (that were closed on 30/10/2019), the monthly sum of 800 dollars per month including 400 dollars in cash of which 200 are withdrawn from the banks’ mandatory foreign currency reserves deposited in the Central Bank. The remaining 400 dollars are dispensed in Lebanese pounds at the rate of 15,000. Any other approach than circular 158, implemented since February 1 ( YEAR??), isn’t likely given the limited liquidity available to banks.