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A senior French official said it could be difficult for banks in Lebanon to uphold the principle that depositors should not lose any of their deposits.
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These statements came during talks in Paris on September 10 between senior French officials and a delegation from the Lebanese Association of Banks. Reuters disclosed the confidential minutes of the meeting.
“While it is a matter of principle for the Lebanese Association of Banks that depositors should not suffer losses, it may be difficult to defend this to the end. But it is a matter of negotiation,” said Pierre Duquin, envoy of French President Emmanuel Macron to coordinate international support to Lebanon.
The Lebanese Central Bank and the commercial bank bankers are trying to avoid a “reduction in the value of deposits” or an official reduction of the balances held in deposit accounts.
But depositors with dollar accounts in Lebanon say they have already lost money because they cannot withdraw the money or because they can only do so by converting it into Lebanese pounds at lower-than-market rates.
The value of the Lebanese pound, which has been pegged to the dollar for more than 20 years, collapsed during the financial crisis.
A senior Lebanese banker who participated in the talks said that during his meetings with French officials addressing the president’s initiative, they felt they supported the prosperity of the banking sector.
A French diplomatic source said the talks were part of efforts to implement the economic roadmap for Lebanon.
In addition to the statements made by Duquesne regarding deposits, he also addressed other required measures, including the rapid implementation of capital restrictions and the merger of banks in a country that has 64 banks controlled by 32 groups.
On restructuring Lebanon’s foreign and domestic debt program, Duquesne said a number of steps should be taken. He added that “there is no magic formula.”
The minutes of the meeting showed that representatives of the Lebanese Association of Banks, including the Association’s president, Salim Sfeir, said that the banks were ready to join “collective efforts” to resolve the crisis and identified proposals that included support to establish a fund to mobilize state assets.
Source: Reuters
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