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Ali Ezz El-Din wrote in the Al-Sharq Al-Awsat newspaper:
A series of circulars issued by the Governor of the Banque du Liban, Riad Salameh, in a single package, caused a great voice in the banking and financial markets. But it seemed to generally fail – for legal and procedural reasons – to achieve the desired results, especially in terms of requiring banks to increase capital within a few months, and in terms of the “retroactive effect” on the return of part of the funds. transferred abroad, which exceeded half a million dollars during the last three years.
A high-ranking banker told Asharq Al-Awsat that the attempt to isolate financial and banking affairs from the country’s political reality and its intractable crises will add heavy burdens to the already depleted financial sector, while the governor of the Banque du Liban and State authorities realize that the capital of banks and the rights of depositors are “locked in” with the Central Bank and the Ministry. Financing in the form of investments, deposits, certificates of deposit and international debt securities; In addition to the realistic cuts that hit the portfolio of treasuries in national currency, as a result of the collapse of the lira.
The banker emphasized that any measure that imposes the injection of new funds to the financial centers of the banking system would be useless, given the lack of trust in the State and its institutions, and under the explicit conditions that the international community reiterates and emphasizes despite the tragedy of the port explosion, with the priorities of forming an inclusive and productive government, and demonstrating serious intentions in Betting on structural reform programs and strict accounting and criminal scrutiny in the causes of the enormous financial gap, whose estimates range between 60 and 90 billion dollars. As well as the commitment to a clear roadmap and the stations to manage public debt and reduce its burden on GDP.
It is not absolutely correct, according to the bankers with whom “Al-Sharq Al-Awsat” spoke, that the monetary authority, which has the task of taking care of the affairs of the sector, threatens to expel from the market those banks “that do not comply. “Or they can’t, if they don’t increase their capital by 20% in a six-month period. Also, the veiled wave of referral to the Supreme Banking Authority, while realizing in advance that banks cannot actually re-import funds transferred abroad, not even by 15 or 30 percent of the original value that exceeds the $ 500,000. The inclusion of clients in this measure does not oblige them to implement it, since it has no legal pretext, and “urging” the bank administrations to implement the task will put them in unjustified conflict with their clients. Please note that some accounts have been permanently closed for the specified period as of mid-2017.
It is known that bank lawyers are focusing on diagnosing the gaps contained in the circulars, before the Board of Directors of the Association of Banks submitted a request to hold a meeting with the governor and the staff of the monetary authority. According to preliminary conclusions, “any transfer that has been made previously or is being made is legal and documented by the Central Bank, the Banking Control Commission and the Special Investigation Commission, based on previous requests.” And whoever gives their money or part of it out of fear of their savings or for any reason related to the client, may not be obliged to return any amount thereof. In addition, the offer of reimbursement for freezing the recovered funds for a period of 5 years is not the ability of the banks to bear, provided that the government’s announcement to suspend the payment of international bonds and their returns takes effect. Note that the banks’ Eurobond portfolio amounts to $ 11 billion.
While banks await clarification on capital raising mechanisms, with their apprehension about limiting them to hard currencies (around $ 4 billion) that cannot be insured under current circumstances, one of the new circulars requires that Each bank carries out a fair evaluation of its assets and liabilities to help it develop a plan that allows it to comply with it, even if gradually, all banking legal and regulatory texts were applied to the banks, especially those related to liquidity and solvency, and to reactivate its activities and usual services to its clients, no less than in October of last year. The circular should be made to the banks “to improve their liquidity; especially with their correspondents abroad, who look for their clients who have transferred more than a total of 500 thousand dollars or its equivalent in other foreign currencies abroad during the period included. between 07/01/2017 and the date of this decision, provided that they are deposited in an account. Private, frozen for a period of five years, an amount equivalent to 15% of the transferred value. The measure also applies to ” politicians “, presidents and members of the board, the main shareholders of the banks and the main executive departments of the banks.
The Central Bank also requested “each bank, within the term ending on 2/28/2021, to form an external account free of obligations with its foreign correspondents, at any time not less than 3 percent of the total of the foreign currency deposits you have as it is on 7/31/2020. All shares in the bank must be listed and traded exclusively on the Lebanese stock exchange. The sale price of shares listed on the stock exchange and the sale price of permanent marketable debt securities and redemption abroad can be transferred if the sale is made with new money.
On the economic side, the Beirut Merchants Association was surprised by the decision issued by the Central Bank on how banks and financial institutions collect their loans and fees from the economic sector as a whole, especially from merchants, industrialists and institutions of tourism and agriculture.
The association considered in a statement that “this circular is incompatible with the constitution, the law and the principle of equal rights and duties among Lebanese citizens, without considering the deterioration of economic conditions, the decline of business up to 80 percent, in addition to the seizure of funds in banks, the impossibility of importing and the collapse of many institutions and companies. And the loss of capital as a result of the crazy rise in exchange rates, as well as the repercussions of the Coronavirus pandemic and the repeated closures that accompanied it, and finally the port accident that destroyed the national economy. The paradox is that we expected decisions that would provide a package of financial incentives and exemptions to economic sectors, rather than weaken them further. The commercial sector will not bear any additional burden and today is in a situation of almost inevitable clinical death ”.
Regarding the basic circular, which ruled to recover 15 percent of the value of transfers abroad, merchants asked the Central Bank to clarify “if it is limited to transfers from private accounts, which is an illegal procedure at origin, or also includes transfers executed for commercial purposes under contracts. Invoices and letters of credit paid to suppliers; Because its impact would be catastrophic and would constitute a fatal blow to the finances of companies operating in Lebanon; Especially since it is taking loss after loss, and kept its financial cycle down on its local accounts in Lebanon to pay for these losses.
And when the association demanded – and urgently – to review these circulars, it affirmed the right of merchants to repay loans in Lebanese pounds at the official rate similar to that of all Lebanese, and this is a legal right guaranteed by the Lebanese constitution and current laws, and there is no text or legislation that allows it, retroactively and unilaterally. The right to acquire from abroad private funds and those paid to suppliers, as specified in the circular. And he highlighted “the need for constant communication with the Banque du Liban to clarify the situation, in order to preserve the organic relationship between the banking sector and the productive sectors, especially the commercial sector sunk in the eye of the storm.”
Source: Middle East
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