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Bank loans are back, but the criteria for accessing them are stricter in terms of candidate eligibility, loan purpose, amount, and repayment period.
Contrary to popular belief, these loans are not available due to fresh deposits in foreign currencies. Such deposits are tightly protected and regulated by a series of circulars issued by the Lebanese Central Bank (BDL).
The funds allocated for loans are derived from the capital accumulated by several major local banks after selling their foreign assets. These funds are what remain after meeting the new liquidity ratios set by BDL.
Short-term Loans
Some financial institutions primarily offer short-term loans, mainly to businesses. These loans are specifically designed for manufacturers to purchase raw materials and for traders to import food products and vehicles. Recipients of these loans must be long-standing clients of the bank with fresh dollar accounts.
As for loans to private clients, another bank source interviewed by This is Beirut specifies that they are granted for a maximum period of two years, excluding real estate loans. Only a few personal loans are approved for clients with a transparent and reliable banking history, along with car loans in fresh dollars.
Liquidity Ratios
Fresh dollar deposits from bank clients are safeguarded, as credit institutions are not allowed to use them for financing loans. Since the onset of the 2019 financial crisis, BDL has mandated, through Circular 150, that each bank must deposit the equivalent of 100% of fresh funds received after April 9, 2020, whether transferred from abroad or in cash. The funds must be deposited into a free account with the Central Bank or its correspondent bank abroad. According to this circular, fresh deposits received after this date must remain available to their holders, who can use or withdraw them partially or in full at their discretion.
Another liquidity requirement that banks have had to comply with since the start of the 2019 crisis is outlined in Circular 154, dated August 27, 2020. This regulation stipulates that credit institutions must hold mandatory reserves in fresh dollars with their foreign correspondents, equivalent to at least 3% of the total value of their deposits before the implementation of this measure.
