Financial overhaul: Finance Committee debates bank reform, fails to move forward on legislation

Report by Lara El Hachem, English adaptation by Yasmine Jaroudi  

A heated three-hour session of Lebanon's Parliamentary Finance and Budget Committee failed to advance the draft banking reform law, as MPs debated the general framework without addressing specific provisions or proposed amendments.

The meeting saw unusually high participation, with 45 MPs in attendance. 

While many emphasized the importance of safeguarding depositors' rights, some MPs left the session describing the discussions as unproductive, while others viewed them as constructive.

The law, which outlines a roadmap for restructuring Lebanon's embattled banking sector, remains unenforceable pending the passage of the Financial Gap Law, as stipulated in Article 37 of the draft. Although most parties agreed on this matter, deep divisions emerged over its implications.

Hezbollah criticized the premise of tying one law to another that has yet to be introduced, calling the open-ended timeline for enacting the Financial Gap Law a 'legal flaw.' The Amal Movement echoed that sentiment. 

The Lebanese Forces Party urged lawmakers to accelerate the review of both laws to hasten the restructuring of banks and restore financial stability. 

Meanwhile, the Free Patriotic Movement (FPM) accused the bill of legalizing "haircuts" on deposits, calling for a comparative study of how other countries have addressed similar crises.

Finance Minister Yassine Jaber, who attended the session, defended the government's draft, citing international examples and reiterating that work on the Financial Gap Law would begin after the Banque du Liban (BDL) shares its input.

Committee Chair Ibrahim Kanaan announced that BDL governor Karim Souaid will appear before the committee next week after missing Wednesday's meeting due to travel.

In a statement, Souaid confirmed that he would submit the first draft of the banking restructuring plan, emphasizing that all stakeholders should align behind a single goal: achieving a gradual and sustainable economic recovery. 

The bank stressed that this must be based on a stronger banking sector, an independent central bank, and a fair, realistic mechanism for repaying depositors over time.