The Association of Banks of Lebanon indicated, during the discussions of the parliamentary finance and budget committee, to be in favor of the establishment of a system of withdrawal of accounts denominated in foreign currency in Lebanese pound at the rate of the new version of the electronic platform to be put online Sayrafa 2.0.
In addition, the ABL considers it necessary to set a ceiling for cash withdrawals in Lebanese pounds in order to contain the size of the currency in circulation in order to avoid inflationary pressures and their impact on the exchange rate.
This information comes as discussions are underway in parliament to adopt a formal capital control while the dollarization rate of local deposits would exceed 83% now.
The ABL indicates that it supports such legislation “preserving the interests of depositors” and considers that this text should be based on 3 general principles, such as the prohibition of transfers of any foreign currency abroad by commercial banks, the halting the conversion of local currency into foreign currency and setting up an economic and social plan capable of stabilizing financial conditions and stimulating the local economy.
ABL representatives also indicate that they are not able at present to allow the transfer abroad due to various factors, such as the fact that their external assets currently exceed their debts abroad by more than 1.7 billion dollars. Also the banks indicate not being able to dispose of the sums deposited in “fresh account” in accordance with the current texts. the 3% of deposits in foreign currencies with the corresponding banks in accordance with circular 154 of the Banque du Liban are necessary in order to preserve the relationship between them.
De facto, they ask that transfers abroad can be made from the foreign currency deposits of the Bank of Lebanon, noting also that the required reserves have fallen by 1.8 billion dollars which the central bank now has.
Finally, they estimate that they can only transfer a maximum of USD 20,000 abroad for each depositor under a fixed condition, for example to cover expenses related to the student dollar, hospitalization of foreign nationals or debt repayment and payment. taxes.
Controversial law over role given to Banque du Liban
As a reminder, the parliamentary committee is currently studying a law establishing a formal control of capital which in fact legalizes various already existing measures.
Thus, the current bill prohibits foreign transfers from customer accounts of Lebanese banks, as well as accounts of banks and financial institutions in the country, with 4 exceptions such as education-related transfers, mortgage payments, payment of taxes and fees, as well as for online subscriptions, depending on the availability of funds.
According to the text, the Central Council of the Banque du Liban (BdL) will set the limits for each category of transfer, provided that the total amount does not exceed $ 50,000 per year on a client’s accounts in all banks in Lebanon. , including joint accounts.
A limit of 20 million pounds per month for cash withdrawals from bank accounts in Lebanon will also be introduced. It excludes the withdrawal of wages from the monthly limit.
The text allows customers to withdraw foreign currency banknotes from their accounts if the funds do not come from the conversion of deposits into Lebanese pounds after 2016, on the condition that the cash does not exceed the equivalent of 50% of the sum withdrawn in Lebanese pound.
It is up to the Banque du Liban to fix a “special formula” to calculate the exchange rate of the Lebanese pound that will be used in this operation, which must take into account the exchange rate of the American dollar on the Sayrafa electronic platform. In addition, the bill prohibits banks from converting deposits of Lebanese pounds into foreign currencies, unless their cash position is sufficient to execute and cover the conversion.
According to the text, the Capital Control Law will replace all existing laws, rules and regulations that do not comply with the new law and will apply to all pending disputes between banks and their customers. In addition, the text allows depositors to pay their official taxes and fees from their foreign currency accounts by bank transfers or checks to the Lebanese Treasury, based on the exchange rate determined by the Sayrafa platform.