Years into the crisis: Lebanon still without a clear path to restore deposits

Report by Lea Fayad, English adaptation by Yasmine Jaroudi 

Despite government claims that progress is being made on Lebanon's long-awaited bank deposit recovery plan, major obstacles remain, with deep disagreements between the government, the banking sector, and the Banque du Liban (BDL).

The first sticking point centers on how to define the nature of the crisis. 

Banks and BDL consider what happened to be a "systemic crisis" that affected the entire financial sector—not just a few banks. 

However, the government refuses to label it as such, since doing so would place greater responsibility on the state, which spent the funds and later defaulted on payments. 

By avoiding this classification, the government effectively shifts most of the losses onto banks and depositors. The International Monetary Fund (IMF) also tends to support this view, as it allows Lebanon to maintain borrowing capacity and repay its debts.

A second source of contention is the government's proposal for a new audit of banks, covering the years before the financial collapse. It is intended to uncover "irregularities," but it has offered no clear standards for how those irregularities will be identified or measured. 

Such an open-ended audit could lead to the further erasure of depositors' funds. 

Meanwhile, BDL says it already has an audit process underway to assess banks based on their exposure to high interest rates and previous financial engineering schemes.

The third dispute involves the lack of consultation with banks and depositors—arguably the two groups most affected by the plan. Banking representatives say they have been excluded from drafting discussions, prompting them to launch a series of meetings to pressure decision-makers.

For now, without clear resolutions to these core disagreements, the recovery plan remains another headline without substance—while depositors continue to bear the cost of delay and political stalling.