Association of Banks warns $20 billion needed to repay small depositors—the details

Report by Bassam Abou Zeid, English adaptation by Mariella Succar

The Association of Banks in Lebanon warned that liquidity constraints pose a major challenge to restoring financial stability, saying the funds required to repay deposits of up to $100,000 would exceed $20 billion.

In the opening editorial of its monthly report, the association said the Central Bank’s assumption of banks’ financial obligations would prevent them from meeting their own liabilities, further complicating efforts to stabilize the sector.

The report noted that there is no clear plan for the fate of depositors at banks that may be unable to continue operating, cautioning against offering depositors promises that may not be fulfilled.

It also warned that the possibility of some banks halting payments during any repayment period cannot be ruled out.

According to the association, banks’ ability to meet their obligations would change if the state were to fulfill its commitments toward the central bank. 

However, it cautioned that wiping out capital and imposing additional burdens would eliminate any incentive for banks to pursue recapitalization.

The association said liquidity management remains a key test for achieving financial regularization amid Lebanon’s prolonged economic crisis.