Lebanese Banking Reform Draft: Banks Oppose Foreign Branch References and Deposit Recovery Provisions

The draft law to reform and reorganize the banking sector in Lebanon is the pathway that would enable banks to resume normal operations if approved by the government and the parliament. 

The draft is ready for discussion within the government, and banks have reviewed it, identifying loopholes that could become a crisis for depositors and the economy.

A banking source clarified to LBCI that banks reject the provisions outlined in Article 4 of the draft law because it includes a reference to the law covering the branches of banks abroad. The government recognizes that these branches are subject to the laws of the countries where they operate and cannot be subjected to Lebanese law. Therefore, there is no need for such a reference to avoid causing trust issues with those dealing with these institutions abroad.

The draft law also addresses the recovery of deposits, with banks urging a unified ceiling of $100,000 for all depositors to be covered by the banks. 

They argue that the wording in the draft law, especially in Article 46, does not ensure this demand and leads to inequality among depositors. 

As a result, they call for amendments and the removal of any ambiguity in this provision, with the Deposit Recovery Fund to be established through the return of deposits exceeding $100,000, expected to be funded jointly by the state, the Central Bank of Lebanon, and the banks.