Draining reserves: 'Sayrafa' dilemma prompts calls for market-driven solutions

Banks have begun implementing the measures mentioned by "Nidaa Al Watan" last Saturday, which involve new procedures for beneficiaries of the "Sayrafa" rate.

The first measure, as explained by a bank director to "Nidaa Al Watan," requires customers applying for "Sayrafa" benefits to sign a commitment stating that they will only benefit from one account, regardless of whether they have multiple accounts within the same bank or across various banks. This commitment will be sent to the Banque du Liban (BDL) as a document to be used if it is discovered that the account holder has received "Sayrafa" benefits from more than one bank, leading to the retrieval of the disbursed amounts.

This article is originally published in, translated from Lebanese newspaper Nidaa al-Watan.

The bank director emphasized that the BDL will scrutinize accounts that have benefited from "Sayrafa" and will reject any requests if it is found that the beneficiary has multiple accounts. This means the process might take longer, adding to the beneficiaries' challenges.

He pointed out that, essentially, they do not accept "Sayrafa" transactions on joint accounts but instead on active accounts, meaning accounts used for localization and current accounts. He describes the current situation as a process of organization and tightening by the BDL. 

In contrast, previously, beneficiaries could receive "Sayrafa" benefits from an account at each bank, and the distinction between supported and unsupported accounts was clear.

It is worth noting that implementing these measures has already commenced in most banks, with other banks expected to follow suit during the week.

However, not all banks have applied the new procedures yet due to specific conditions set by some banks for accessing "Sayrafa." For instance, Bank Beirut requires a minimum balance of fresh USD 50,000 or dollar accounts to be eligible for "Sayrafa" operations.

Regarding strictness on "Sayrafa," it seems all banks will be affected.

A source from "Nidaa Al Watan" reported that a beneficiary of "Sayrafa" at Bank Beirut deposited one billion Lebanese lira two weeks ago to convert it into dollars through the platform. However, they could only convert LBP 36 million into dollars last Friday, citing that the BDL reduced the bank's "Sayrafa" quota, leaving the remaining amount in the Lebanese account and taking their commission from the converted dollar amount.

Commenting on the situation, Jean Riachi, the Chairman of I&C Bank, expressed concerns about "Sayrafa." He highlighted two main issues; firstly, he acknowledged that "Sayrafa" has become a new support mechanism for public sector employees, which is justified. However, he emphasized that the state should be responsible for securing employees' salaries, not the depositors' funds.

Secondly, he pointed out that "Sayrafa" is inherently non-transparent. The stability in the black market's exchange rate is not due to "Sayrafa" but rather the intervention of the BDL. Riachi questioned how long this intervention would continue, which would deplete depositors' funds.

He suggested a solution to address the long-term issue, which aligns with a proposal put forward by the third deputy governor, Dr. Salim Chahine.

According to Riachi, they are draining the reserves - depositors' funds and the current platform is not truly a platform. Instead, the BDL determines the dollar's exchange rate and records the transactions.

He clarified that the platform should be a place for trading, and the price should be determined by market demand and supply, whereas the current disparity exists between the market rate outside the platform and the regulated rate within the platform, causing issues for institutions and companies benefiting from "Sayrafa."