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The situation was exacerbated by the harsh words Prime Minister Hassan Diab addressed to the Governor of the Banque du Liban, asking him to uncover suspicious and ambiguous monetary uncertainties in the country, after reports arrived indicating the accumulation of bank losses, which they were approaching the accumulation of losses in the profit account, AND losses equivalent to the gross national product, and half of the public debt. It was learned that the cabinet tried to test the possibility of issuing a decision to impeach Governor Riyadh Salameh, but ministers of the Amal movement warned that an ill-considered measure would not be taken that could lead to the collapse of the Lebanese pound. Likewise, the government collided with Article 19 of the Monetary and Credit Law: so that “the governor can only be removed due to a health deficit or a breach of his labor duties in accordance with criminal law, or an error fatal in conducting business. ” In our evaluation, the seriousness of the monetary and credit law lies in articles 18 and 19 related to the continued extension of the ruler without specifying a period of time and avoiding his removal. As for the other defect, which makes the BDL difficult to monitor, it is Article 13 of the law, which exempts the bank from being subject to the rules of administration and conduct of business, and the controls to which they are subject public sector institutions. It seems that the drafters of the law were in good faith or utopianism, so they were inspired by the provisions of French law, considering that rulers will belong to the category of righteous and enjoy the virtues of hermits.
It turns out that the flaw occurred in the renewal of the Governor of the Bank of Lebanon, at the beginning of the era of President Michel Aoun, which occurred after pressure from the ruling class. President Aoun is carrying out an economic project that contradicts the ruling class, and had to change the ruler who represents the interests of the ruling authority, but national and international pressures prevented the implementation of his decision.
The main error in the ruler’s performance is a systemic and media error, by announcing repeated guarantees about the stability of the lira’s exchange rate, the assets available in the Bank of Lebanon and the ability to control the exchange market. And the course of events confirmed that these guarantees went with the wind, and lost their credibility, while having to tell the truth even once, and public opinion is open about the financial and monetary situation.
Each party has a responsibility to achieve economic, financial and monetary collapse, starting with the political authority and the banks and the governor of the Banque du Liban.
The other mistake made by the ruler is the support of troubled banks. Support for one of the major banks, which has taken huge risks in Turkey and Erbil with hundreds of millions of dollars, has led to the request for support from other banks, as a matter of “jealousy and slander”, which demanded El bank is conducting financial engineering, paying more than $ 4 billion in its reserves. Consequently, the Lebanese depositor in banks is not responsible for the risky companies and investments made by some banks, and the central bank has expanded the application of Article 99 of the Cash and Credit Law: which states that “the central bank does not is bound by a mandatory principle to make loans to banks, but it does. ” As far as he sees, his help serves the public interest. “From the above it is evident that the Central Bank has exceeded the narrow limits granted by law in the field of loans. But if the steps taken by the Banque du Liban were understood To support depositors at Al-Madina Bank, at a time when the balance of payments was in excess, as well as the bank’s reserves, then the support of banks that had bad loans in recent years was not a smart move by bank in charge of people’s deposits. What exacerbated public opinion was that the bank granted comfortable loans to politicians and high officials of the public sector, to buy real estate with an interest not higher than 1%, so those who do not They needed it, they benefited from the loans, at the expense of the middle class.
On the other hand, some politicians and revolutionaries demanded to know the destination of the contraband funds after October 17, 2019, which were carried out by bank owners and some politicians and financiers, and the discriminatory prosecutor, head of the Supervisory Committee Bank of Lebanon Bank, asked to determine the destination of the contraband funds. However, the Chairman of the Committee did not give the Prosecutor the required response. The Bank of Lebanon has tried to hold the banks responsible, and this is incompatible with Article / 149 / of the Monetary and Credit Law: The Central Bank exercises its control as follows: “Verifying the data, documents, information, clarifications and evidence that banks must provide or that the central bank has the right to request. Of them, in accordance with the provisions of this law. On the other hand, banks have the legal and administrative responsibility to transfer large amounts of money abroad and prohibit small depositors from withdrawing their money through the Haircut process without being associated with a mechanism based on applicable laws.
The Bank of Lebanon lent to the state, especially more than 70% of the state budget in the spending area through bank loans, treasury bonds or through eurobonds, by providing high interest to banks. The Bank of Lebanon should have alerted successive governments to the Bank of Lebanon credit risks, because the bank’s general mission under Article 70 of the Monetary and Credit Law is to preserve cash to secure the basis of the economic and social growth, preserve the integrity of Lebanese cash and maintain economic stability. And maintaining the integrity of the banking situation. From here, it is clear that it is not a fundamental task of the bank to provide loans to the state: it is the exception, not the rule.
As for the previous governments, which overlooked the financial and monetary conditions and the balances of the Banque du Liban, the Cash and Credit Law under Article 41 mandates the establishment of a “government commission” at the central bank, Called a government commissioner, since he is in charge of guaranteeing the implementation of the monetary and credit law, and of controlling the bank’s accountability. The delegate has the right to see all the records of the Central Bank and its accounting documents. The question that comes to mind is the absence of the image government commissioner, and his inability to play his supervisory role, unless he wants to have a non-public role behind the scenes. The logical question is, if the government commissioner has the required numbers, why were the president and prime minister unfamiliar with the reality of BDL budgets?
It seems that the disappointment of the Governor of the Banque du Liban was due to the myths that have been woven by most of the Lebanese media about the genius of Riyadh Salama and his ability to maintain the financial and monetary situation, with the consent or independently of the ruler. Because the legend lives in the souls of the stages of time, to show that the practical reality is not in line with the overconfidence in the legend, and that Riad Salama does not have absolute authority in the conduct of the work of the Bank of Lebanon . It works amid storms, against a political authority unable to provide economic solutions, and governments that have based their budgets on Bank of Lebanon loans, rather than relying on imports as a general principle.
In the final analysis, each party is responsible for achieving economic, financial, and monetary collapse, beginning with the political authority, the banks, and the governor of the Banque du Liban. It has been shown that the policy of stabilizing the lira against the dollar was a successful policy in the medium term, but that this policy ultimately led to the collapse of the Bank of Lebanon reserves in foreign currency, and here successive governments they are responsible for stabilizing the exchange rate of the national currency.
The time has come to modify the monetary and credit law to align with the requirements and gaps that have arisen in its application, and to empower the Central Bank and the Ministry of Finance to supervise banks, and to restore the leading role. of the Bank of Lebanon in the same way as central banks, so that it is not in line with totalitarian states in financing the state budget.
* Former ambassador