[ad_1]
A new circular that the Central Bank of Lebanon intends to issue early next week, and its “motto” is also “to restore confidence in the banking sector” and to activate the local economy. How? Any bank that wishes to receive a deposit of fresh dollars must reserve its consideration in the correspondent bank (abroad) at 100% of the value of the deposit (which means the possibility of transferring the entire amount in dollars to the correspondent bank). For example, in the event that a person intended to open an account with a bank with 100,000 “real” dollars in cash, the bank would have two options: First, transfer the 100,000 dollars in its entirety and directly to his account with the Corresponding bank. Second, it is to open a local account for the client to deposit the $ 100,000, but in exchange for this the bank has to deposit $ 100,000 in the correspondent bank abroad.
The decision was made at the Central Council meeting last Wednesday, and the circular will be officially issued on the first of next week. Salameh justifies this step as “the only solution to restore people’s confidence in the banking sector.” The governor believes that giving people a guarantee that they can get dollars when they ask for it, “will encourage them to deposit the dollars they store in their homes with banks.” But Salameh not only wants to “win over” the depositors, but also addresses, through the new circular, the Correspondent Banking. The latter is the “agent” of the Lebanese banks abroad, providing money transfer services and financing foreign trade. Correspondence banks are guarantors of payment to an exporter, according to Lebanese banks that are guarantors of payment by the importer. The banking sector crisis and the financial situation in Lebanon negatively affected the relationship with correspondent banks, which no longer accept remittances from Lebanon or open letters of credit for trade. By reinjecting dollars into Lebanese bank accounts abroad (3%) and demanding that “fresh” deposits be insured before they are accepted into the Lebanese banking system, Salameh sends what, close to him, calls a “positive message” to correspondent banks that there are enough dollars to cover transfers and commercial operations.
Circular Banque du Liban that transforms banks into intermediaries between the depositor and the correspondent bank
But will this circular, which does not lead to radical restructuring, really restore “confidence building” in a collapsing banking sector? Those close to Salameh, and some bankers, see this step as the “only weapon” today. They explain that the liquidity of the “3%” that the banks were asked to pump abroad (estimated at about $ 3.4 billion for the banks combined), will form the basis of the new circular, because the funds raised from the market and sent to the exterior will be used to cover deposit accounts in US dollars. As for the “attraction” of banks for deposits that exceed the value of the accounts of 3%, then “banks will have to transfer the new deposit to the correspondent bank or create a reserve against it.” Those close to the safety of the measure describe the measure as a translation of the “new economy”, legislating for the “post-fresh” phase and, more importantly, preventing banks from ditching them. But if the latter chooses to keep the money in its branches within Lebanon, “it will have to buy dollars in the market to create a reserve in exchange for the deposit abroad and, therefore, add more losses to its budgets, or extend su Hand over the money of your owners and major shareholders to secure the collateral, “which you won’t. Get started. But legally, there are no impediments to transferring “fresh” dollars abroad, so what is the need for a generalization that serves the same goal? Sources reply that banks are currently “intimidating” the “fresh food customer, for example by demanding that a percentage of the deposit in US dollars be frozen in exchange for transferring the rest.” In addition, this small “pocket”, which is created from fresh dollars, “will be used to recycle dollar cash and use it to finance import and export operations.”
The circular will increase the withdrawal of dollars from Lebanon instead of attracting them
Most banks are upset by the new circular because it “prevents” them from directly benefiting from fresh dollar investments, such as buying bonds, lending, using them at the Banque du Liban or even transferring them abroad. He considers that it comes in the context of the “Cold War” and the tug of war between him and the Central Bank. However, for the circular there are “critics” outside the banking sector, who are financial experts who consider that “what is not necessary” is necessary. The first objective is to deposit dollars in the banking sector. Previously, “people were motivated by higher profits. But if banks are obliged to deposit dollars in correspondent banks, this means that they will receive an interest in return that will not exceed 1%, and in turn they will be obliged to reduce the interest rate they pay to the depositor to less than 1%. How will this encourage depositors? “The second noteworthy point of the circular is that at a time when it seeks a way to inject dollars into Lebanon and attract deposits into its banking system, the Central Bank imposes an obligation to withdraw them under the pretext of” insuring “them. Will this lead to reactivating the economy and activating the work of the banks? “Contrary to its stated direction, the BDL circular interrupts the work of the banks, does not activate them and turns them into an intermediary no more than between the depositor and the correspondent bank .
The Central Bank will not liquidate any bank in difficulty!
The Banque du Liban issued a statement confirming that “banks must meet the deadlines stipulated in their circulars to increase capital and ensure external liquidity without any modification.” The deadline ends on February 28 and, subsequently, banks must “send all their data to the Banking Control Commission, which in turn verifies them and sends the pertinent reports to the Banque du Liban.” The statement added that the BDL’s approach “will be aimed at taking all measures aimed at addressing the situation of the banks, leading to strengthening the stability of the banking situation and ensuring the funds and rights of depositors.” In this context, “there will be coordination between the Banque du Liban, the Supervisory Committee, the Special Investigation Commission, the Financial Markets Authority and the Supreme Banking Authority, under the supervision of the Governor of the Banque du Liban a in order to verify the implementation of Circular 154 (exceptional measures to reactivate the work of the banks). Informed sources report that the open meetings, starting next week, will be attended by all authorities and control bodies “to scrutinize all the tools used by banks to increase their capital, and spread the word that offenders will be prosecuted. . The fact that the Banque du Liban does not extend the grace period does not mean that it does not study the situation of each bank and make individual decisions. For example, banks that sold foreign units will need months before the end of the transfer transactions and obtaining the sums to inject them abroad or into their capital, so you may get an exception. Or the bank, which still needs a small amount to ensure its full foreign liquidity, will be discussed in its state. “According to sources, the Banque du Liban” will not liquidate or merge any bank. The general tendency is to lay a hand on the troubled bank (or part of it) by writing permanent bonds or stocks, and changing direction within it. “
Subscribe to «News» on YouTube here
