Lebanese Prime Minister Nawaf Salam said on Friday that the government had put forward a long-awaited banking draft bill that distributes losses from the 2019 economic crisis between banks and the state.
The draft law had been demanded by the international community, which has made financial reforms a condition of economic aid to Lebanon.
In a televised speech, Mr Salam said “this draft law constitutes a road map to getting out of the crisis” that grips Lebanon.
The draft will be discussed by the Lebanese Cabinet on Monday before being sent to parliament, where it could be blocked.
Lebanon has been mired in an economic crisis for six years, a situation compounded by last year’s war between Israel and Iran-backed Hezbollah. Beirut is seeking foreign assistance to help to rebuild and revive its economy.
Under the proposed law, losses incurred during the crisis would be shared among the state, the Central Bank, commercial banks and depositors.
Depositors, who lost access to their funds after the 2019 crisis, will be able to retrieve their money, up to $100,000, over four years.
Mr Salam said that 85 per cent of depositors had less than $100,000 in their accounts.
The wealthiest depositors will have the remainder of their money compensated with asset-backed securities.
“I know that many of you are listening today with hearts full of anger, anger at a state that abandoned you,” said Mr Salam.
“This bill may not be perfect … but it is a realistic and fair step towards restoring rights, halting the collapse.”
The International Monetary Fund, which closely monitored the drafting of the bill, had previously insisted on the need to “restore the viability of the banking sector consistent with international standards” and protect small depositors.
The Associations of Banks in Lebanon criticised the draft law on Monday, saying in a statement that it contains “serious shortcomings” and harms commercial banks.
The text provides for the recapitalisation of failing banks, while the government’s debt to the Central Bank will be converted into bonds.
Mr Salam said that the bill aims to “revive the banking sector” which had collapsed and given free rein to a parallel economy based on cash transactions, facilitating money laundering and illicit trade.
According to government estimates, the losses resulting from the financial crisis amounted to about $70 billion, a figure that is expected to have increased over the past six years while the crisis was not addressed.
Since assuming power, Mr Salam and President Joseph Aoun have pledged that reforms and legislation will be put in place.
In April, Lebanon’s parliament adopted a bank restructuring law, because the previous legislation was believed to have allowed a flight of capital at the outbreak of the 2019 crisis.
The new bill stipulates that politically exposed people and major shareholders who transferred significant capital outside the country from 2019 onwards – while ordinary depositors were deprived of their savings – must return them within three months or face fines.
The draft law could still be blocked by parliament even if the Cabinet approves it. Politicians and banking officials have repeatedly obstructed the reforms required by the international community for Lebanon to receive financial support.
With agencies
