Experts call for protecting Lebanese depositors amid unprecedented financial crisis

by Dana Halawi

BEIRUT, — Experts on Friday called on Lebanon’s authorities to advance a recovery plan that would preserve the rights of depositors in Lebanese commercial banks to restore confidence in the ailing banking sector.

“The government has issued debt instruments to borrow depositors’ money through the central and commercial banks. Hence, as a state representative, the government must hold productive discussions with creditors to reach a fair and constitutional solution,” former Central Bank Vice-Governor Mohammed Baassiri told Xinhua on the sidelines of the Beirut Economic Forum 2022 which was inaugurated in the capital city on Thursday.

The forum, organized by the Union of Arab Banks (UAB) in Beirut, focuses on sharing local experiences in economic reforms, in part helping Lebanon to secure financial support from the International Monetary Fund (IMF), and discussing ways to find a proper recovery plan to Lebanon’s economic crisis.

The plan stated that small depositors would be protected “to the maximum extent possible” in each viable bank, prompting depositors and their advocacy groups to question clarity and feasibility.

Also, the plan would cancel “a large part” of the central bank’s foreign currency obligations to commercial banks, and non-viable banks should be dissolved by November.

The largest 14 commercial banks in Lebanon, representing 83 percent of the country’s total assets, will be audited, and viable banks will be recapitalized with “significant contributions” from bank shareholders and large depositors.

Though already launched by the government earlier this year, the plan has yet to be implemented due to the country’s political impasse.

Samir Hammoud, a banking consultant and former chairman of the Banking Control Commission of Lebanon, said it is a priority to protect all depositors, including the ones who spent their life outside their countries to save money back in their homeland.

He said depositors should be able to receive their money back in the same currency of deposit.

Hammoud suggested using some of the banks’ assets to recreate the banking sector with new capital, governance, and liquidity according to BASEL standards, a global standard setter for the prudential regulation of banks, which would restore the confidence of the IMF, rating agencies, and audit firms.

Hammoud also emphasized the need for Lebanon to boost its partnership with Arab countries to restore confidence in its banks.

Baassiri stressed the need to elect a new president and form a functioning cabinet committed to immediate reforms to restore confidence in the banking sector which is an uneasy but necessary task.

Osama Ahmed Ben Saleh Bukhari, head of the International Chamber of Commerce Banking Commission, said depositors are not responsible for failed policies adopted by consecutive governments.

He proposed using digital currency to compensate partly for the lost deposits instead of printing money.

“Part of the deposits can be paid back electronically, which would place less burden on the system,” he said.

Lebanon’s unprecedented financial crisis forced banks to restrict withdrawal from deposits, placing a heavy burden on people by depriving them of their savings.  

(Xinhua)