The deadline for raising bank capital ends tomorrow. What will happen to the Lebanese deposits?

The deadline set by the Banque du Liban for Lebanese banks to implement a circular obliging them to increase their capital by 20% and to open accounts with correspondent banks of at least 3% of the total funds deposited with them in foreign currency foreign expires tomorrow.

In addition to “urging” its customers to return 15% of their transfers, as of July 1, 2017, and to place them in an account frozen for 5 years. As for administrators and other politically exposed persons, they must also return 30% to accounts frozen for 5 years.

While the Association of Banks called for the extension of the deadline, Banque du Liban has so far been determined to reject the extension.

And we assume that the central bank takes possession of the banks that fail to raise their capital.

In this context, the bank and economist Nicola Shekhani explained, in an interview with Al Arabiya, that many banks were not able to increase their capital by 20% within the time limit. Even if it was capable of it, this step is not sufficient because it does not cover its losses estimated at 35 billion dollars “.

According to his point of view, Lebanese banks suffer from two fundamental problems: a solvency problem and a liquidity problem, stressing that the main crisis concerns the banks’ dollar investments at the Banque du Liban worth 80 billion dollars. dollars, or depositors’ funds estimated at 114 billion dollars and are now “bogus deposits”.

According to him, the solution is an integrated reform plan at the level of the “golden triangle”: the Bank of Lebanon, the banks and the Ministry of Finance.

Case study for each bank separately?

In addition, the Central Council of the Banque du Liban mentioned, during part of its weekly meeting yesterday, the commitment of the banks to the central circular “No. 154, which stipulates that the banks reinject dollars in their accounts at least with the corresponding banks. 3% of total foreign currency funds deposited in banks. “Lebanese”.

Lebanese pound

Starting next week, intensive, perhaps daily, meetings will begin to review the situation of each bank, determine whether it has committed to increasing its capital by 20% and creating external accounts.

It is likely that the Banque du Liban “will study the case of each bank separately, to determine whether it is possible to agree on an exception to extend the deadlines”.

The Bank of Lebanon will also ask the Association of Banks “to provide it with the list of banks which have returned funds from abroad.”

Bank sources say that “the Banque du Liban cannot consider that the banks have not respected the circular 154, and resort to an extension of the deadlines before Friday, because some banks can wait until the last day to pump the necessary funds there. “.

Until the situation is finally clear, the dollar exchange rate will continue to rise due to the huge demand from banks who are willing to pay any exchange rate, however high it may be. , in exchange for obtaining fresh dollars.

Banks of Lebanon – Associated Press

Banks resort to raising “dollars in the market, either by selling bank checks for less than 30% of their value (in exchange for $ 3 million in cash, the bank issues a check for $ 10 million)), or by doubling the deposits by more … sometimes more than 3 times their value (transfers every million dollars. “” Tazaj “the client deposits it in the bank into an account of 3 million dollars which cannot be withdrawn in cash).

And banks need, together, to open accounts abroad, the value of funds deposited in them at about 3.3 billion dollars. And some big banks still need tens of millions of dollars to secure the amounts required.