Equal rules for all banks: Lebanon's central bank seeks fast-track solution to return billions in trapped deposits

Report by Lea Fayad, English adaptation by Karine Keuchkerian

If you’ve been benefiting from Banque du Liban’s circulars and withdrawing $500 or $250 per month, depending on your individual limit, you’re likely wondering whether those amounts will increase soon.

So far, there is no definitive decision from the central bank on the matter. According to banking sources, the current priority is finding a swift and comprehensive solution to the issue of frozen deposits in Lebanese banks.

“It is essential that deposits be returned to their owners in full,” said Banque du Liban Governor Karim Souaid during his first meeting with a delegation from the Association of Banks in Lebanon. 

The governor shared his vision and ideas for restoring the central bank’s financial balance to distribute losses and responsibilities eventually.

According to available figures, the total value of frozen deposits is estimated at around $85 billion. The governor is working on a plan to reduce that amount by addressing irregularities that occurred both before and after the onset of the crisis.

Among the proposed ideas, according to banking sources, is the deduction of certain amounts from specific categories of deposits. 

These include individuals who benefited from high interest rates and financial engineering schemes, those who repaid dollar-denominated loans in Lebanese lira at the official rate of 1,500 LBP or other below-market rates, and those who converted their deposits from Lebanese lira to U.S. dollars at the 1,500 rate after the 2019 crisis. 

Deductions may also apply to accounts with sources of funds deemed suspicious.

Following such deductions—or partial deductions—the total value of deposits would be reduced, making repayment more manageable. 

Responsibility for repaying depositors would be shared among the state, Banque du Liban, and the banks, which would be required to increase their capital and liquidity.

The governor reportedly told the Association of Banks that all financial institutions will be treated equally, with no favoritism, emphasizing his role as a regulator rather than a stakeholder.

He also underlined the importance of maintaining the central bank’s independence from the state, in order to protect its assets from potential lawsuits by Eurobond holders against the Lebanese government. 

Such legal action could target Lebanon’s gold reserves, which are owned by the central bank and ultimately by depositors.

Sources within the Association of Banks described the meeting as positive, especially because they were included in the vision, ideas, and dialogue aimed at resolving the crisis—a shift from previous approaches in which the association was excluded from discussions.