Circular 158 amendments: Implications and challenges for Lebanese depositors

As each new Circular is issued by Banque du Liban (BDL), all eyes turn to the banks. The reality is that there are no fundamental solutions to the crisis, and everything happening is merely a patchwork attempt to restore people's deposits.

However, a slightly positive development emerged with the modification of Circular 158, which aims to alleviate losses on depositors.

One of the latest steps taken was the amendment of Circular 158.

According to this Circular, depositors could withdraw $400 monthly from their accounts and an additional $400 in Lebanese lira at the fixed rate of LBP 15,000 per dollar. Under the new amendment, the Lebanese part will be eliminated, and depositors will be able to withdraw the $400 until the deposits in their accounts are exhausted, as specified in the Circular.

Moreover, if a depositor wishes to renew or open a new account, they will be limited to a monthly withdrawal of $300 under the recent amendment.

While eliminating the Lebanese part of the Circular means eliminating losses, especially with the market exchange rate surpassing LBP 90,000 per dollar, depositors need to be cautious about the extended deadline for recovering their deposits. For instance, under the previous Circular, one could recover $30,000 in approximately three years.

However, with the amendment, if a depositor withdraws $400 per month, it would take over six years. If the withdrawal amount is reduced to $300, it would take over eight years.

The predicament is that the $30,000 is losing its value over time. Instead of being able to withdraw and invest profitably or purchase a car or a shop, depositors are left with minimal and interest-free withdrawals. However, there is no other choice.

Banks, once they begin implementing the amendments, await logistical preparations, and depositors show little enthusiasm for the changes made to Circular 158, resulting in a modest bank activity level.