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Banks continue to discuss draft law to bring financial order back into balance

Lebanon Economy

2023-02-02 | 10:18

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Banks continue to discuss draft law to bring financial order back into balance

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While the Finance and Budget Committee continues to discuss a draft law to bring financial order back into balance, banks continue to criticize the formula in which this proposal reached the Parliament, claiming that it contains numerous ambiguous clauses that require clarification and practical amendments from the lawmakers to be enforceable.

Banking sources commented on a sentence in the proposal that read: "Treatment of part of the Central Bank's obligations to banks in a way that assures coverage of debts that may be owed to banks from the Central Bank."

Banking sources deemed this pledge to be favorable in principle since it indicates that the state will make some contribution to assisting the Banque du Liban in paying its debts to banks so that they may then pay depositors.

However, there are a lot of questions about this issue. The uncertainty arises from two primary points when the proposal mentions paying for a portion of the Central Bank's commitments to banks: What does the word "portion" mean? And secondly, what approach will be taken to assist the Central Bank in this regard?

According to banking sources, there is a significant difference between the state pledging to secure 10% of these commitments, for example, and securing 60, 70, or 80% of these debts.

In the first scenario, the issue will continue to be unsolvable. In the second scenario, the process of guaranteeing the people's deposits would have begun.

Banking sources stated that since the governor of the Banque du Liban revealed the amount of money that the authority withdrew from depositors, which exceeds 60 billion dollars, the parliamentary discussion must begin from this number to determine the amount that the state should secure to be able to address the deposit dilemma.

Banking sources claim that in the absence of such actions, things will continue in an ambiguous way that neither advances nor delays.

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