After the decision yesterday of the Shoura Council to suspend circular 151 of the Banque du Liban which had established an exchange rate of 3,900 LL / USD last October in the event of withdrawal from dollar accounts and demanded payment in foreign currency, Lebanese banks and their leaders are said to be worried about this decision, which could lead to the bankruptcy of their establishments and the sequestration of their personal property.
Some institutions have thus suspended all operations pending the official position of the Banque du Liban.
As a reminder, no appeal of this decision is possible. The Banque du Liban is expected to specify in the coming days the procedures announcing the cancellation of this circular and the establishment of a new mechanism for withdrawing funds. Thus, the most likely hypothesis would be that banks can allow the withdrawal of small amounts in dollars, which is difficult however due to the insolvency of several large establishments.
Another possibility is payment up to the official parity in the event of withdrawal, ie 1,507 LL / USD. However, this measure could also be faced with appeals before the Lebanese justice or at a rate at the discretion of the client. This measure could lead to formalize consequently an uncontrolled discount of dollar accounts.
A last possibility and not the least would be to recognize the bankruptcy of the banks and therefore lead to the liquidation of a large part of the current establishments. In such a scenario, the managers of these banks as well as the main shareholders could see their personal assets be seized by justice in order to repay the debts of these banking establishments.
However, the assets of banking institutions themselves could be overvalued compared to the reality of the market already before the crisis. Some sources estimate that there is a difference of 25% or even more between the book value of these goods and the real market value. As for the existing capital, in spite of an increase carried out not long ago, it would have already evaporated because of the crisis which the Country of the Cedars is going through.
As a reminder, total deposits with Lebanese banks reach 148.65 billion dollars according to the latest figures published by the Bank of Lebanon, of which 83% in approximately dollars.
Banks already considered insolvent in report released last year
The report published in 2020 by the Foundation for Defense of Democracies and entitled Crisis in Lebanon, Anatomy of a financial Collapse considers all the Lebanese banks studied as insolvent. They are also threatened by legal proceedings, accused of money laundering and because of the link of certain establishments with Hezbollah in the USA.
• Bank Audi SAL
• Bank of Beirut SAL
• Bank of Beirut and the Arab Countries SAL
• Bankmed SAL
• Banque Libano-Française SAL
• BLOM Bank SAL
• Byblos Bank SAL
• Lebanese SAL credit
• Fenicia Bank SAL
• Fransabank SAL
• IBL Bank SAL
• Lebanon and Gulf Bank SAL
• MEAB Bank SAL
• Société Générale de Banque au Liban SAL
Among the banks cited:
In total, the 14 banks taken into account would require an injection of 67 billion dollars, which is far from the maximum sums that Lebanon could obtain in the framework of international aid, that is to say 26 billion dollars (15 billion dollars loans via the IMF and $ 11 billion via CEDRE on the condition of putting in place the economic, monetary and financial reforms necessary to unblock them).
According to calculations made by a foreign expert, all the establishments would require massive injections of funds, going up to 11.9 billion dollars for the BLOM alone, followed by 11 billion dollars for the Bank Audi, amounts today impossible to pay. find in Lebanon itself. The risk of bankruptcy or even complete shutdown is therefore present for these establishments with significant losses for current shareholders.
They could only survive if they merge or haircuts the deposits present.
