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Thu, 23 Jan 2020 08:55 GMT

Lebanese Central Bank Wants 'Exceptional Powers' to Unify Cash Caps

Business

7Dnews London

Sun, 12 Jan 2020 17:50 GMT

The Governor of the Central Bank of Lebanon, Riad Salameh, on Sunday January 12th, said that he had requested extraordinary powers from the government to regulate the restrictions applied by the country’s banks on depositors and to unify them in order to ensure their fair and equal application to banks and customers.

In order to prevent capital displacement, commercial banks have imposed severe restrictions on withdrawing deposits and have blocked some transfers abroad since October. Since then, Lebanon has witnessed massive protests due to the widespread economic crisis gripping the country, Reuters reported.

The Lebanese authorities have not imposed formal capital restrictions to regulate these measures.

Salameh confirmed in a text message to Reuters that he had sent a letter to the Lebanese Finance Minister on January 9th to request "exceptional powers necessary to issue regulations” pertaining to conditions in the sector, He also told Reuters that he was not seeking to use the extraordinary powers to introduce new procedures.

The caretaker government did not issue any response to Salameh's request to interim finance minister Ali Hassan Khalil.

Salameh wrote that the restrictions of commercial banks had "on several occasions led to prejudicing the rights of some clients, particularly with respect to the unequal treatment with other clients.”

Salameh urged the Minister of Finance to work with the government ""to take appropriate legal measures ... to entrust the bank," with the necessary extra powers.

In his justification of this requirement, he said that these measures were needed to "secure the public good, to protect banking and monetary stability... and to protect the legitimate interests of depositors and clients.”

In a related context, Bloomberg reported on Sunday that the Central Bank of Lebanon wanted local investors in foreign currency bonds worth $1.2 billion, due in March, to be exchanged for longer-term bonds.

“We are making pre-emptive proposals that are voluntary and dependent on the consent of Lebanese banks," Salameh said in an interview in Beirut. “We haven’t taken any decision yet because we don’t have a government.”

He said that the Finance Ministry should convert holders of bonds in foreign currency, due in March, to longer-term bonds with a higher return.

According to Bloomberg, the plan will help Lebanon, one of the cities with the highest debt levels in the world, in facing the worst economic crisis in decades.

Lebanon currently faces the worst economic crisis since the civil war that raged between 1975 and 1990, and its roots go back to decades of state corruption and bad governance that overburdened the country with the heaviest public debt burdens in the world.

Middle East