Lebanon's financial prosecutor took the decision to freeze the assets of 20 of the country's banks, the state-run news agency reported on Thursday.
Judge Ali Ibrahim also imposed a freeze on the assets of the heads and members of boards of directors of these banks, the National News Agency reported. It didn't name the lenders or provide any additional information. Separately, Lebanon's cabinet approved a draft law to lift banking secrecy, Reuters reported, citing Justice Minister Marie Claude Najm.
Lebanon is experiencing its worst economic crisis since the end of a 15-year civil war in 1990, which gave rise to an unprecedented wave of public protests in October. The crisis led to the Lebanese pound losing more than a third of its value against the US dollar on the black market and lenders implementing capital controls.
Lebanon has one of the highest debt-to-gross domestic product ratios (166 per cent) in the world, according to the
Institute of International Finance (IIF). Its public debt increased 7.6 per cent to $91.64bn year-on-year as of the end of December 2019.
Lebanon’s business environment continued to deteriorate in February with new orders and employment falling as the country grapples with economic uncertainty and a March 9 deadline to repay $1.2 billion (Dh4.4bn) of maturing eurobonds.
The Blom Lebanon PMI index, a composite measure of business conditions in the private sector compiled by IHS Markit, improved slightly to 45.4 in February from 44.9 the previous month, staying below the 50 mark that separates economic expansion from contraction.
In February, rating agencies S&P Global and Moody's Investors Service downgraded Lebanon deeper into junk territory, on the expectation the country would default and have to restructure its debt.
Lebanon was able to escape the 2008 global credit crisis relatively unscathed due to a high interest rate regime, which lured more than $1bn a month in capital flows that financed its fiscal and current account deficits. The country's economy, which has long suffered due to domestic politics, rapidly deteriorated following the outbreak of war in neighbouring Syria in 2011, which slowed the flow of funds and led to negative deposit growth at Lebanese lenders.
"The deposit dollarisation rate rose to 76 per cent at year-end 2019, from 71 per cent a year earlier, as residents sought to convert local currency to dollars amid evaporating confidence in the financial system and the currency peg," S&P Global said last month. "The run on deposits could have been more severe, if not for the restrictions on FX [foreign currency] withdrawals and transfers imposed by banks."
The Lebanese economy has entered its third consecutive year of negative growth and its public debt has risen to unsustainable levels. In the period from 2011-19, real GDP growth averaged only 0.5 per cent, the current account deficit exceeded 21 per cent of GDP and the fiscal deficit reached 9 per cent of the economy's output.