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Aug 16 2019 - 13:30
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Salameh during closing ceremony of Maronite Academy 2019 class: Our banking sector is safe and sound

publishing date: 16/08/2019 13:30:49
The closing ceremony of the 2019 class of the Maronite Academy, news ,lbci ,أخبار Maronite Academy,Lebanon,The closing ceremony of the 2019 class of the Maronite Academy,
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Salameh during closing ceremony of Maronite Academy 2019 class: Our banking sector is safe and sound

The closing ceremony of the 2019 class of the Maronite Academy, organized by the Maronite Foundation in the World was held on Friday at the Holy Spirit University of Kaslik.

 

A number of renowned Lebanese figures and officials attended the ceremony, and speeches were delivered by head of the Lebanese Maronite Order Father Namatallah Hashem, Mr. Thomas Barrack, Mr. Charles El Hage, H. E. Gilbert Chagoury and BDL governor Riad Salameh.

 
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In his speech, Governor Salameh said: “Laozi, a Chinese philosopher, once said: “If you do not change direction, you may end up where you are heading.”

 

"Lebanon needs to strengthen confidence in its future.  We have shown resilience in the face of adversity and negative campaigns; but now is the time to lay a vision for the future.

 

The President of the Republic, and in presence of the Speaker of Parliament and the Prime Minister, recently convened a meeting to discuss how to jump-start the economy and take initiatives to reassert financial stability.

 

All the participants unanimously approved the need to reduce political tensions, remove obstacles that prevent the functioning of institutions, and implement the 2019 budget.

 

In this environment, the Government could implement its road map: the Electricity Reform, the Budget of 2020, the CEDRE conference reforms, the McKinsey report for Lebanon, the oil and gas exploration. All of this will help reduce the deficit and enhance growth, which will provide confidence to the markets.

 

Beyond this road map, we believe, at Banque du Liban, that the main reform that will consolidate confidence and attract investments to procure growth and employment opportunities, consist in reinvigorating the private sector.

 

The public sector grew to an extent that became a liability to the economy, competing on its financial resources and impeding growth (crowding out effect).

 

Total deficit for the period 2012-2018 is of $30 billion.

 

Total increase of nominal GDP in US dollar for the same period amounts to $12 billion (from $44 bn in 2012 to $56.5 bn in 2018).

 

We also believe that three main sectors will lift other sectors and will secure competitive advantages to Lebanon: The Financial Sector, The Digital Knowledge Economy Sector, and the Gas and Oil Sector.

 

The Central Bank is working in coordination with the Capital Markets Authority (CMA), the SIC, and the Banking Control Commission, to provide a soft landing to our economy that is witnessing deleveraging and a zero growth.

 

Our commitment to a stable exchange rate serves price stability which is needed to maintain inflows in foreign currencies. Lebanon has a dollarized economy and is a net large importer.  The dollar is used in 75% of the transactions in our local market.  The deficit of our current account exceeds 20% of our GDP for the last three years. Floating the currency will undermine confidence and thus the inflows. It will also create hyperinflation.  Dollarization and low exports will hinder us from gaining a competitive advantage. Of course, maintaining the peg is costly for Banque du Liban, but less costly than floating the currency.

 

The Banking Control Commission is adopting a strict and rational approach towards the credit market.  Net NPL stands at 6%.  Our objective at the Central Bank and at the Banking Control Commission is to maintain viable, the economic players who are incidentally in difficulty.  But it is up to the banks to decide whether to provision or to reschedule when they are facing delays in credit payments from their clients.

 

The CMA has recently granted a license to Bank Audi Group and the Athens Stock Exchange to operate an electronic platform where shares, commercial papers, currencies, gold, and other financial products will be traded.

 

The Operator has dedicated a minimum amount of 100 million dollars to maintain secondary markets.  This electronic platform will also be a hub for the domiciliation of various types of companies from all over the world.  Even if these companies are not eligible for trading.

 

It will as well be electronically accessible from any country. The Lebanese Diaspora will be able to invest, trade, and incorporate safely, since the ETP will be regulated and supervised by the CMA.

 

The SIC is the Lebanese arm to fight money laundering and terrorism financing, and to help in investigating tax evasion cases. Lebanon has been recognized by the FATF and the OECD as a country that enacted the necessary legislation in both fields. The compliance system in our financial sector satisfies the requirements of correspondent banks. As such, Lebanon has avoided derisking and remained integrated in the global financial market, which was beneficial to Lebanon and its economy.  We are committed to continue on that path, in order to preserve our integrity and our reputation.

 

The Rating Agencies – Standard & Poor’s and Fitch - are reviewing the sovereign rating of Lebanon.  We hope that they will maintain the rating of our country as it stands now.  Nevertheless, BDL has, by anticipation, initiated actions to shield the financial sector from a downgrade of the sovereign risk.

The revenues that banks generated from the financial engineering of 2016 had to be capitalized and not distributed, pursuant to a directive issued by the Central Bank at that time. This helped raise the capital adequacy of banks to almost 16%.  A downgrade will bring down this ratio to 12%, which will still be largely above the Basel requirement.  Besides, another Circular issued this year will enable banks to gradually rebuild the solvency back to the present levels.

 

Our banking sector is safe and sound, and was able to swiftly implement the new world regulations related to risk and liquidity.

 

We remain committed to our policy of avoiding any bankruptcy in the banking sector and therefore provide the best protection to depositors.

 

Whatever the difficulties are, Lebanon has and enjoys means that exceed its geographical size and the dimensions of its economy.  This, on condition that we maintain confidence. And our actions aim at preserving the confidence in our financial sector.

 

As Winston Churchill said: “Success is not final, Failure is not fatal, it is the courage to continue that counts!”

 

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