Lebanon Prosecutor Interrogates Bankers Over Capital Flight

Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP
Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP
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Lebanon Prosecutor Interrogates Bankers Over Capital Flight

Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP
Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP

A Lebanese prosecutor Monday questioned bankers over more than 2 billion dollars in capital flight in past months despite strict banking restrictions in the crisis-hit country, judicial sources said.

Banks have since September imposed increasingly tight limits on dollar withdrawals and transfers abroad as part of measures to tackle a severe liquidity crisis.

But bankers stand accused of having sent millions of dollars abroad despite those limitations since mass anti-government protests erupted on October 17.

Lebanese banking association head Salim Sfeir, as well as representatives from 14 banks, appeared before financial prosecutor Ali Ibrahim, the sources said, AFP reported.

They testified "over the transfer abroad of 2.3 billion dollars during the two months since the start of the popular uprising", they said.

They were questioned over "the causes of the transfers abroad of the money of bank owners, which reduced liquidity in the internal financial markets".

They were also asked why other depositors were unable to make transfers abroad for trade or to pay tuition fees.

Bankers were asked to justify "the inability of depositors to withdraw from their US dollar accounts... while that restriction did not apply to the powerful".

Lebanon is currently facing its worst economic crisis since its 1975-1990 civil war.

The value of the Lebanese pound has plummeted on the black market, prices have risen, and many businesses have been forced to slash salaries, dismiss staff, or close.

Lebanon is one of the most indebted countries in the world, with a public debt equivalent to 150 percent of its GDP.

The country is now under pressure to pay a $1.2 billion Eurobond maturity on March 9.

Economists warn payment on time would eat away at plummeting foreign currency reserves, while bankers say a default would damage Lebanon's reputation with lenders.

Bank of America Merill Lynch in a November report estimated that around 50 percent of Eurobonds were held by local banks, while the central bank had around 11 percent.

Foreign investors owned the remainder or around 39 percent, it said.

But these figures may have changed, with local media reporting that local banks have recently sold a chunk of their Eurobonds to foreign lenders.

The judicial sources said those summoned on Monday were also asked about those sales.

According to AFP, representatives of other banks are to be called in later this week.



Insurance Costs for Ships in Strait of Hormuz Rise Over 60%

 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
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Insurance Costs for Ships in Strait of Hormuz Rise Over 60%

 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 

Insurance prices for ships travelling through the Strait of Hormuz have jumped more than 60% since the start of the war between Israel and Iran as the conflict threatens shipping in a key chokepoint for crude oil, the Financial Times newspaper wrote on Wednesday.

As of this week, the cost of hull and machinery insurance for ships passing through the strait — a narrow waterway between Iran and Oman, connecting the Gulf to the Arabian Sea — as well as the wider Gulf area had risen from 0.125% of the value of the ship to about 0.2%, according to the world’s largest insurance broker Marsh McLennan.

This pushes the cost of cover for a $100 million ship from $125,000 to $200,000.

Hull and machinery insurance covers damage to the ship itself, as opposed to cargo or third-party liability.

“We’ve not yet seen a missile fired at a ship in the Arabian Gulf, so what it represents is the market saying, look, there’s definitely a heightened level of concern about the safety of shipping in the region,” Marcus Baker, global head of marine and cargo insurance at Marsh McLennan, told the Financial Times.

Prices could rise further, he added.

Ships trying to pass through the strait face a range of dangers, from electronic interference to attacks by the Iran-backed Houthi group and the threat of further escalation by Israel and Iran, said brokers and insurers.

On Monday there was a collision between two oil tankers near the Strait of Hormuz.

While the cause of the crash has not yet been publicized, one ship had transmitted atypical signals about its position, raising concerns about electronic interference.

Baker said insurers were also worried that Houthi militants could widen their attacks, damaging more ships than the US, UK and Israeli-flagged vessels they have generally been targeting.

The market is “concerned about every vessel” travelling through the area because of Houthi attacks, Baker said.

Some insurers could stop offering cover because of the risks, he added, but others might see any pullback as an opportunity.

“War itself, as an insurance product, tends to be...either you lose everything or make a fortune. And many fortunes have been made by underwriters prepared to take a risk,” he said.

Insurance rates for cargo, including oil, were also likely to rise because of the conflict, multiple brokers said, but had been slower to respond.