Lebanon’s Salameh : We are not worried about a bubble

Share:

Lebanese Central Bank Governor Riad Salameh discusses the exposure of the country’s banks to government debt as well as the latest efforts to insulate the lenders from a crisis in neighboring Syria.

He spoke in an interview today at his office in Beirut.

On economic growth:

“The indicators are showing that the real growth could be between 3 percent and 3.5 percent, which is in line with the estimates of the IMF. We have seen an improvement in the consumer sector. We have seen hotel occupancy at over 66 percent and an improvement by 10 percent in the activity of the Beirut airport.”

“Last year, the growth in that period was around zero percent for the first quarter and it was essentially related to the political situation in Lebanon as we had a change in government and the new government was not constituted yet.”

On the effect of unrest in Syria on Lebanon’s economy:

“The softness that we’re seeing this year is related to the activity that is outside of Beirut because the Syrian crisis has negatively impacted the activity in the region. Tourism by way of land has been hit, and transit activity has also been hurt because the cost of transit and insurance has increased.”

On bank provisions against unrest in Syria:

“Banks have constituted general provisions already, and that explains why you don’t see an important growth in the profits of banks. We don’t expect any surprise on our banks from the economic crisis in Syria. Over and above we have seen a reduction in the exposure of Lebanese banks to Syrian businesses either from here or from Syria by 40 percent during the past 15 months.”

On limiting transactions with Syrian banks based on a circular issued April 5:

“The Lebanese banks will not deal with institutions or persons that are on the sanction list inEurope, the U.S. or the Arab League. Syrians are free to open bank accounts in Lebanon as they are free to open all over the world. But the banks here will refrain to open for those on the sanction list.”

On the government raising yields on treasury bills this year by half a percentage point:

“That is in our markets a mild correction. That correction was needed to allow the banks to maintain stability in the deposit rates, not to increase them.”

“The IMF had recommended such an improvement in order to allow the auctions to be served by the market and to decrease the intervention of the central bank in these auctions. The results were good because we are seeing increased bidding on the Lebanese treasury bill auctions, the weekly auctions were seeing surpluses even.”

“The attraction on the Lebanese sovereign can be measured also by the success of the Eurobond issue that was launched lately by the government. It was three times oversubscribed. The interest rates that Lebanon is today working with are still at a historical low. Don’t forget that Lebanon is also positioned today geographically where you have trouble in the Mediterranean countries and trouble in the Arab world. So being able to maintain by market forces this level of rates proves that there is confidence in the financial system.”

On deposit growth in Lebanese banks so far this year:

“At an annual base it’s 8 percent or a little bit more, that’s annualized for 2012. If the situation remains stable, even with the political atmosphere we’re having, we might head toward 9 percent. In 2011, the increase was 8 percent also. The total deposits are presently at $122 billion.”

On credit growth:

“The annualized estimate, according to the first quarter, will reach 13 percent increase in credit growth this year. Last year there was an increase of more than 12 percent.”

“The banks have developed a lot of lending in the sector of housing and this was successful. The consumer loans excluding housing also are growing at a good pace. We are seeing also some funding done to big projects in the country that are between real estate and tourism. We’re not worried about a bubble because we have a circular saying that they cannot lend more than 60 percent of the value for a project.”

On dollarization in the banking system:

“Dollarization is back to 65 percent after hitting 66 percent last year. We have seen during the first four months movement of de-dollarization and the central bank intervened to buy dollars. We bought $900 million from the market during these four months this year.”

“We are committed to a band whereby we allow the Lebanese pound to fluctuate between 1,501 and 1,514 per dollar. When we get to 1,501, if we want to maintain that floor we have to buy the excess dollars that are in the market. We had more offers of dollars than the market needed by $900 million dollars in these four months, which we took into our reserves.”

On total liquid assets in foreign currency:

“Today our total liquid assets in foreign currency amount to over $32 billion. This doesn’t include the stock of gold, which is evaluated at $16 billion, and it doesn’t include also other assets that the central bank owns, like shares in companies and real estate.”

 

Bloomberg

Share:

Comments

2 responses to “Lebanon’s Salameh : We are not worried about a bubble”

  1. 5thDrawer Avatar
    5thDrawer

    Sounds good.

  2. 5thDrawer Avatar
    5thDrawer

    Sounds good.

Leave a Reply

Your email address will not be published. Required fields are marked *