The Secretary-General of the Association of Banks in Lebanon (ABL), Fadi Khalaf, stated that the role of the state and its financial institutions are aggravating Lebanon’s financial crisis. Khalaf stated, “A series of measures and initiatives undertaken are in direct conflict with fundamental principles of international law, including the United Nation’s principles regarding countries’ international responsibilities.”
In the introductory remarks of the association’s monthly report entitled “State Responsibility, Even After Some Time,” Khalaf underscored that these principles define the framework within which states must operate to ensure financial and economic stability. He emphasized that states bear full responsibility for any failure to effectively regulate and oversee the financial system.
Thus, “asking the state to be accountable is not merely a right for those affected by this crisis, but also a duty linked to ensuring justice and restoring trust in the financial system,” he asserted. He further stated, “Those affected must insist that the state fulfills its obligations, even after some time, while simultaneously advocating for the implementation of radical reforms to prevent the recurrence of such crises. Holding the state accountable is both a right and a duty, to ensure that justice is upheld and obligations are met.”
He further stresses the importance of “holding the state accountable so that it’s clear to everyone that the crisis is systemic, and the state bears primary responsibility for the significant dwindling of deposits.”
Therefore, using supporting data, he compiles the following:
• According to Article 113 of the Code of Money and Credit, the losses of the Lebanese Central Bank (BDL) of Lebanon amounted to $51 billion until 2020, and they are borne by the state.
• The state’s debt to BDL amounts to $16.5 billion.
• BDL has spent approximately $23 billion to support smuggling, traders and the Lebanese pound since the beginning of the crisis through mandatory investments in banks.
• The state has avoided enacting laws that would prevent borrowers from profiting at the expense of depositors, amounting to $31 billion.
Furthermore, Fadi Khalaf asserted that the figures show that “the state, along with its institutions, bear the responsibility for the depletion of over $121 billion out of the $124 billion deposited in banks on the eve of October 17, 2019.”
Khalaf concluded by saying, “While it’s true that no one expects the state to magically compensate for its wrongdoings or liquidate its assets to settle debts with banks and depositors, citizens do hope for some transparency regarding potential solutions. This begins with the state acknowledging its role in the systemic crisis it has caused, thereby paving the way for viable solutions. By shifting the fallouts of its actions onto banks and depositors to evade accountability, the state adopts a scorched-earth policy. Covering-up the truth would destroy the entire banking sector and wipe out any hope of recovering the deposits.”
