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Lebanon: Banks' Capital Raise Will Not Help Release Depositors’ Dollars

Lebanon: Banks' Capital Raise Will Not Help Release Depositors’ Dollars

Wednesday, 3 March, 2021 - 09:15
FILE PHOTO: Lebanon’s central bank is seen closed under a national lockdown imposed to contain the spread of coronavirus, in Beirut, Lebanon March 17, 2020. REUTERS/Mohamed Azakir

A Lebanese banking official told Asharq Al-Awsat that completing the banks’ data pertaining to the implementation of the Central Bank’s instructions to fortify their financial positions after the deadline expires at the beginning of this week, technically requires a few additional days that may extend until mid-March. This means that verification and auditing procedures would be extended to the end of the month.

The official, who spoke on condition of anonymity, noted that the evaluation upon the expiry of the deadline would be made on the basis of measuring the banks’ commitment to raise their capital by 20% and establish accounts with 3% of dollar deposits in foreign correspondent banks.

He explained that the banks were already busy finalizing the procedural and legal measures to complete the data required from the Central Bank. These include transferring funds to external accounts on the one hand and calling for exceptional general assemblies to be held to approve the two increases.

This information is consistent with the outcome of the expanded meeting of the BDL’s Central Council, which was also attended by the Banking Supervision Commission, whereby “it was agreed to develop a road map with deadlines for implementation through which the central bank will resort to taking appropriate measures related to the implementation of the provisions of Circular No. 154 based on the reports prepared by the Supervision Commission.”

On whether these capital increases would allow the banks to resume the release of their clients’ dollar deposits, the banking official said: “It is too early to expect this serious change to take place amid the prevailing exceptional processes and exchanges.”

“Breakthroughs cannot be expected unless they are preceded by internal developments that allow the formation of the new government, the conclusion of the promised agreement with the International Monetary Fund, and the return of the flow of aid and soft loans allocated during the CEDRE conference,” the source added.

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