Banks Association: Trust key to economic recovery and banking reform

Lebanese banks expressed serious reservations and strong opposition to the draft law before the cabinet on financial regularization and deposit handling. 

They said its provisions unjustifiably undermine the rights of banks and depositors and lack sound legal and financial standards or international precedents for addressing banking crises.

In a statement, the banks said any proper legal and financial approach to addressing the crisis, including the so-called “financial gap,” requires a precise and transparent assessment of the gap at the Central Bank of Lebanon, based on audited, standardized accounting data, and realistic financial modeling that reflects actual losses and the real value of non-performing assets. 

They argued that the draft law would effectively erase private bank funds and then extend losses to depositors.

The banks added that the proposed measures do not account for their actual capacity to meet obligations to depositors, nor the state’s failure to cover its debts to the central bank. 

They noted that the central bank holds over $70 billion in assets, part of which could be liquidated to immediately repay small depositors, instead of passing losses caused by the state and central bank onto banks and depositors, which violates principles of fairness and legal responsibility.

The banks stressed that sustainable economic recovery and effective restructuring of the banking sector depend on rebuilding trust in the financial system and in the state as a law-abiding party committed to its contractual and financial obligations. 

They added that such trust cannot be restored while the state continues to evade its debts, and it cannot be built through retroactive measures targeting banks and shareholders that undermine recapitalization and endanger depositors, financial stability, and social cohesion.