Lebanon’s commercial banks do not have the liquidity to return money to depositors who retain their savings in the country's bank accounts, the head of the Lebanese banking association said on Wednesday.
“These numbers show beyond any doubt that there is no liquidity with the banks”, the Association of the Banks of Lebanon's Fadi Khalaf said in a monthly report.
Lebanon’s banks imposed informal, ad hoc capital controls at the beginning of Lebanon’s economic crisis in 2019, when signs of the country’s liquidity crisis first began to show, locking people out of their savings.
Since then, banks have severely limited the amount of money depositors can withdraw from their accounts. For the most part, depositors can only withdraw dollars at an artificially imposed rate that is worth a fraction of the dollar’s true value in the parallel exchange market in Lebanon — the market where foreign currencies, particularly the US dollar, are bought and sold outside the official banking system. This market exists because of the significant difference between the official exchange rate and the black market exchange rate.
The measures have sparked anger. In recent months, depositors — sometimes armed — have taken to holding up banks and demanding the return of their own money.
Activists and financial experts have long advocated for banks and politicians to agree on reforms that will lead to financial recovery and the implementation of a plan to return deposits to citizens. But no major reforms have been implemented, more than three years after the first signs of economic collapse emerged.
Lebanon’s political elite and its bankers “need to get out and get out now”, said Fouad Debs, a lawyer and co-founder of the Lebanese Depositors Union, which advocates for the release of deposits. “They’re operating at the expense of society”.
“The longer they are not held accountable, and in control of the banking sector, the longer this crisis will extend”, he added.
The financial crisis has left more than 80 per cent of the population living under the poverty line and struggling to make ends meet, unable to retrieve their savings and forced to use a currency that has lost 98 per cent of its value against the US dollar since the country's economic crisis began in 2019.