Lebanese Prime Minister Nawaf Salam said on Friday 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 is a demand from the international community, which has set conditions on economic aid to Lebanon on financial reforms.
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 now, 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 crisis, will be able to retrieve their money, with a limit of $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 see the remainder of their money compensated by 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, giving free rein to a parallel economy based on cash transactions, which facilitate 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 six years that the crisis was left unaddressed.
Since assuming power, Mr Salam and President Joseph Aoun have pledged the necessary reforms and legislation will be put in place.
In April, Lebanon’s parliament adopted a bank restructuring law, as 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 persons 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
