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The Al-Akhbar Al-Youm newspaper has published a report by Mohammed Wahba entitled: Fears of Lebanon's decommissioning operation: the IMF program is always ready.
"Since the announcement that Standard & Poor 's may have degraded Lebanon, a campaign of intimidation has been launched, based on the need to make sacrifices in order to avoid a collapse. Who financed the reforms, even though the loans granted to the State and to the Bank of Lebanon were very profitable
The prospect of a deterioration of Lebanon by a second rating agency (after Moody's) is very likely. This implies, as always, the marketing of the IMF's boxed recipe, which consists of increasing the tax on gasoline consumption, increasing the value-added tax to 15% and reducing the spending of the Treasury devoted retirees. These proposals, which emerge from time to time and are adopted by politicians, businessmen, bankers, traders and industrialists, have returned to the market based on the possibility that the agency "Standard & Poor's "Retrograde Lebanon" in its next report on August 23rd. The issue of decommissioning is being used to promote the IMF program that prevents banks from contributing to the financial correction process and imposes the burden of correction on the poorest segments of society by raising consumption taxes. What people are told is that the options available are so narrow that increasing taxes on gasoline and value-added is the only solution. What the IMF is advocating now is limiting the options to the IMF program. This is something that some ANP forces have tried to impose during the discussion of the draft budget 2019, and they will try again to impose it during the discussion of the draft budget 2020.
In fact, the downgrade of Lebanon's rating by Standard & Poor's would not constitute an additional drop in Lebanon's debt rating, but rather a complement to that of Moody's earlier this year, which lowered it from B3 to Caa1. Standard & Poor's will likely lower Lebanon's current rating of -B to CCC +, which equates to Caa1 with Moody's. Moody's degradations mean a shift from a "high credit risk" to a "very high credit risk". Under Standard & Poor's, this means going from "fragile to non-repayment with the ability to meet one's obligations". "Fragility in the face of non-payment, inability to cover financial obligations in certain economic and financial circumstances."
The decline of the Lebanese debt clbadification is not an event in itself, but reflects the level of deterioration achieved by the crisis, ie it is not not the cause of the crisis as it is marketed today between bankers and businessmen. Behind this promotion, they are pursuing other goals that are in line with what the IMF has been trying to promote for a long time: increasing consumption taxes and exempting capitalists.
According to informed bankers, decommissioning by a second rating agency imposes on banks a set of procedures stipulated in the Bank of Lebanon's circulars concerning solvency ratios and loan and investment arrangements. Article VII of Basic Decision 12713 on the application of IFRS 9 requires banks and financial institutions to "make a quarterly and, where appropriate, periodic badessment of the credit risk for each type of badet in the budget and extrabudgetary commitments involving "We review fiduciary risks, in particular to ensure that the level of risk and the magnitude of this increase increase significantly."
Basic Decision 6939, "Regulatory Framework for the Capital Adequacy of Banks Operating in Lebanon", specifies the credit risk weights of the portfolio of government bonds that must follow the banks, in accordance with the approved ratings. For example, if the Lebanese rating is degraded by Standard & Poor's or by two rating companies, the banks will have to raise their own funds at the levels set by the Bank of Lebanon for solvency ratios. "The deterioration is related to the level of risk on the bank investments," explained a banker, who explains: "The high risk is measured in weights for each element of the banking badets, that it is safe to use. whether private sector loans or government loans. "Basic Decision 6369 states that, within the limit of -B or less, banks should credit the credit risk on Treasury bills in $ 150 dollars. instead of 100%, while the credit risk of deposit certificates issued by BDL in USD increases from 50% to 75%. "Thus, if the rating is downgraded, the ability of banks to meet their financial obligations will be reduced and they will have to increase their own capital.There are options for this increase: increase shareholder capital or deduct amounts of profits and inject them into capital.
This technically complex issue has an essential indication: the crisis is continuing, but that does not mean in any way that the collapse is permanent, but rather that it is more likely to occur depending on the situation. evolution of the crisis. But, according to economic sources, "this is used to promote a set of rejected measures because it affects the poor and middle segments in exchange for a neutralization of the possibility for banks to contribute more, because they are more concerned by that question. "Banks have to pay because they have benefited from the public debt at the expense of the poor and middle clbades paid."
However, a banker pointed out that the governor of the Bank of Lebanon, Riad Salameh, was working on the adjustment of credit risk weights and solvency ratios according to the possible degradation of the Lebanese rating by Standard & Poor & # 39; s. Decommissioning will leave banks and their solvency ratios ".
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