By admin 
Lebanon’s Parliament final month partly lifted banking secrecy legal guidelines in a uncommon transfer to encourage transparency and revive the nation’s scattered economic system.
For the reason that 2019 monetary collapse that introduced the war-torn nation to its knees, banking sector reform has been a prerequisite for acquiring assist from multilateral lending establishments. The brand new regulation permits entities, together with impartial auditors, to immediately entry banking data from the previous decade.
“The banking secrecy invoice is a instrument,” feedback Sibylle Rizk, director of public insurance policies at Kulluna Irada, a Beirut-based assume tank. “Now it must be used: whether or not by banking authorities for restructuring the sector, by the judiciary, or by the tax administration.”
For the reason that 2019 crash, the native forex has dropped 98% in worth and most Lebanese can’t entry their deposits. Financial institution losses are estimated at $76 billion, elevating the essential query: Who pays?
Producing a solution that satisfies a large number of events now falls partly on Karim Souaid, governor of Banque du Liban since March. Souaid’s nomination was controversial, having allegedly been urged by the banks’ foyer.
On his first day in workplace, he emphasised the necessity to “progressively return all financial institution deposits, beginning with small savers.”
However the brand new governor’s rapid precedence should be “to launch banking audits to get an correct image of property and liabilities,” says Rizk. “He additionally must work on a spot decision framework primarily based on a good distribution of losses that considers public debt sustainability.” Authorized frameworks on financial institution decision and loss allocation should be authorised by Parliament.
None of those reforms will probably be straightforward, she provides, however they’re key to unlocking negotiations with the Worldwide Financial Fund, reestablishing the banking sector’s capability to fund financial exercise, and taming the money economic system, which has dominated since 2020. Final October, the watchdog Monetary Motion Process Pressure (FATF) positioned Lebanon on its grey checklist for cash laundering and terrorism financing.
“The Lebanese banking sector should reconnect with the worldwide monetary system, rebuild relationships with correspondent banks, regain entry to world capital markets, and re-establish credibility,” says Wissam Fattouh, secretary of the Beirut-based Union of Arab Banks.
However to revive their popularity and guarantee solvency, Lebanese banks will want new companions. Current shareholders might improve stakes, however regional and worldwide banks should step in as properly.