Protecting Depositors’ Funds: The Fate of Circulars and the Banking Sector in Lebanon

2023-09-06 21:00:57
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If the Acting Governor of the Banque du Liban, Wassim Mansouri, refuses any harm to the compulsory reserve with legislative or non-legislative protection, as he stated when he took over the governorship in early August, then he is supposed to follow his saying and also refuse to prejudice the deposits of depositors in Lebanese banks, where hierarchies are practiced on them, at a rate of 85 percent, through circulars Which was issued by the former governor of the Banque du Liban, and today it is eroding and evaporating along with the banks and the Banque du Liban, and certainly the ruling authority, knowing that Mansouri did not address, during his press conferences that he held since he took over the rulership, the fate of the circulars issued by the previous rulership and the subsequent prejudice to depositors, and the fate of these deposits only through the completion of a law Restructuring the banking sector, canceling a banking platform and replacing it with the Bloomberg International platform, and freezing Circular 165, while the rest of the circulars are still in effect.

Mansouri says, as quoted by his visitors: “With regard to the money of depositors, people must be frank with the file, and work hard to find serious solutions, and this matter can only be done according to the laws that I demand. These three laws, along with the budget that reduces the deficit to the maximum extent, if achieved, a balance can be found, and therefore the matter should not be limited to “banking” and paying the salaries of workers in the public sector and what is related to the management of the public utility, but rather we must return to the axis of distribution of losses and advancement. .

And what is required of Mansouri is to take decisions that protect the country from additional inflation, from unfair distribution of losses, and to force the authority to be frank with depositors regarding the fate of their deposits. Today, the deduction is done in a convincing way, as depositors get 15% of their deposits at the maximum, and this comes with continuous inflation, and with a drain on the dollars entering the market, which are pumped exclusively to support the currency and finance imports. What money will be invested in the economy next?

And the banking risk expert, Dr. Muhammad Fahili, calls on Mansouri to review these circulars with his fellow three other deputies and tell us, objectively and transparently, if they are supportive and adhere to these circulars or not.

These basic circulars, which were issued in the presence of the four deputies of the former governor of the Banque du Liban, Riad Salameh, were essential in regulating the relationship between the depositor and the bank, and were issued due to the absence of laws to regulate this relationship. These circulars concluded that Riad Salameh was accused of legalizing haircuts on depositors’ money, and gave enough room for bankers to benefit from (commissions) at the expense of depositors. In addition, these circulars lack justice, especially circulars 151 and 158.

Faheili gave a quick and brief look at these circulars:

• Circular 150, dated April 9, 2020, is the date of birth of the “fresh dollar” accounts, but among its repercussions was the death sentence for dollars and foreign currency balances in accounts formed and deposits completed before this date, i.e. “local dollar” accounts.

• Circular 151, dated April 21, 2020, is the date that the Banque du Liban realized the seriousness of Circular 150 and the birth of the “local dollar”, and the Central Bank set an exceptional exchange rate for withdrawals under the provisions of this circular.

• Circular 154, dated August 27, 2020, is the birth date of the Bank of Lebanon’s plan to restructure the banking sector.

• Circular 157, dated May 10, 2021, is the date of incorporation, not the launch of a banking platform.

• Circular 158, dated June 8, 2021. It is the first decision that aimed, with premeditation and determination, to draw the limits of eligible deposits and allocate them with an installment of fresh dollars, and unqualified deposits and kept them under house arrest in bank accounts facing the fate of monetary exclusion.

• Circular 161, dated December 16, 2021, is the circular that employed a banking platform to pay the salaries and wages of the public sector at a subsidized exchange rate, and operates with it only for a period of one month subject to amendment by its provisions, renewal of its work, or cancellation.

• Circular 165, dated April 19, 2023, was born out of pressures on Lebanon by the international community and the Financial Action Task Force (FATF) to adopt measures to reduce dependence on banknotes in the local economy to narrow the space for those seeking money laundering. This circular may be an essential step to launch the process of restoring confidence in the banking sector.

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