Comments made by Lebanon’s central bank governor Riad Salameh have created a legal confusion in Lebanon after he said that banks were not compelled to give dollar banknotes to depositors.
Observers said Salameh’s remarks gave an indirect support to banks to convert accounts in dollars to the Lebanese lira, without depositor approval, a step seen by economic experts as a violation of banking laws.
“The forced conversion of depositor accounts from dollars to the local currency requires a law approved by parliament,” economic expert Marwan Iskandar told Asharq Al-Awsat on Friday.
He noted that if implemented, such a decision would lead to an overhaul of Lebanon’s economic system.
Elie Yachoui, another economic expert, told the newspaper that Salameh’s comments are far from reality.
“The recent decisions of banks are already fully violating the nature of Lebanon’s free economic system and are against the Constitution and the Code of Currency and Credit,” he said.
The same opinion was shared by legal expert Hani Ahmadiyeh, who explained to Asharq Al-Awsat that legal procedures that regulate Lebanon’s banking sector do not allow for the conversion of accounts without the approval of depositors.
“The laws that regulate banking activities in Lebanon do not include any clauses allowing banks to legally take such measures,” Ahmadiyeh said.
He explained that the problem of depositors does not lie with the banks but rather with the Central Bank, which is legitimizing some practices.
Lebanon is facing an acute dollar shortage and deteriorating economic conditions.
Since protests erupted on Oct. 17, commercial banks have imposed stiff controls in a bid to prevent capital flight, imposing tight caps on dollar withdrawals and blocking most transfers abroad.
“There is a crisis and difficulties, but not a collapse,” Salameh said in an interview with Lebanon’s MTV on Thursday.
“Not a single bank will go bankrupt and banks facing difficulties will be merged,” he added.
“There won’t be a haircut,” the Governor answered in response to a question.
“I want to fix things and reassure the Lebanese about their monetary situation,” Salameh went on to say.
Asked about the latest reports about the alleged transfer abroad of billions of dollars by a number of politicians, Salameh said: “We’ll send teams from the central bank’s Special Investigations Commission to the banks to explore the outcome of investigations into the transfers and we will then send the result to the state prosecutor so that he takes the necessary measures.”
Salameh also ruled out a “revolution of the hungry,” but noted that poverty is expected to increase, urging measures.