Debate grows: Lebanon banking plan may leave 550,000 depositors without full repayment

Report by Lea Fayad, English adaptation by Yasmine Jaroudi 

About 550,000 bank depositors in Lebanon could be unable to recover their frozen savings, even within the $100,000 ceiling pledged by the government under its financial gap law, according to a new study by global consultancy Ankura.

The study, prepared in response to the draft financial gap law, found that Lebanese banks lack sufficient liquidity to repay depositors under the current framework. It warned that implementing the plan in its present form could further weaken the banking sector and slow the country's economic recovery.

The findings come more than four years after banks imposed sweeping restrictions on withdrawals amid Lebanon's financial collapse.

According to the study, only about six banks would be able to continue operating after the fourth year of the deposit repayment process envisioned in the plan.

A delegation from the Association of Banks in Lebanon presented the study to Prime Minister Nawaf Salam, outlining what it described as major obstacles to implementing the draft law in its current form, as well as provisions it considers ambiguous.

Among the key concerns raised is that the draft law does not clearly differentiate between categories of depositors. 

The association argued that the proposal fails to distinguish between those who benefited from the crisis through check-trading practices and those who did not benefit at all. It also does not differentiate between depositors who held funds in a single bank and those who distributed their accounts across multiple banks.

According to the association, the absence of such distinctions creates inequality among depositors and increases the overall cost of the recovery plan.

Salam expressed openness to improving the draft law and clarifying its provisions, according to participants in the meeting.

The parliamentary Finance and Budget Committee has begun reviewing and debating the proposed legislation.