Arab Press

بالشعب و للشعب
Friday, Mar 29, 2024

Lebanon banks should 'go first' in absorbing losses, caretaker deputy PM says

Lebanon banks should 'go first' in absorbing losses, caretaker deputy PM says

Lebanon's banks should "go first" in absorbing losses stemming from the country's financial collapse through their capital, caretaker deputy prime minister Saade Chami said on Thursday, denying the state would rely on a sovereign fund or gold reserves to reimburse depositors who had lost their savings.

Shami is the architect behind a recovery roadmap that Lebanon's cabinet passed just before it went into caretaker status last month and which includes several measures that are required to unlock relief funding from the International Monetary Fund.

It includes a full audit of the Central Bank's forex financial standing by consultancy firm KPMG in the next two months and a subsequent write-off of a "large part" of its foreign currency obligations to banks.

The Associations of the Banks of Lebanon has rejected the plan, saying it would force depositors and banks to bear the brunt of $72 billion in estimated losses.

Shami stood his ground on Thursday, telling Reuters that "banks should go first in terms of their capital before we can touch any depositors".

"We are not going to do a Robin Hood principle in reverse, taking from the poorer to give to the richer – this is not acceptable," he said, calling on banks to "make sacrifices" to protect depositors.

Shami said the government would aim to return up to $100,000 of depositors' savings over time, which he said Lebanon's banks had the foreign currency assets to cover through "reserves of the central bank, liquidity in the banking system, deposits of correspondent banks, loans to the private sector, among other things".

He could not say whether the banks' physical assets could contribute to this but denied media reports the government had decided to use gold reserves to reimburse depositors.

Shami said he was open to the idea of a sovereign wealth fund to broadly manage state assets but said he was against incorporating those revenues into the reimbursement scheme as it would not be enough to plug the hole in losses.

Instead, the government would contribute $2.5 billion in long-term bonds that could be added to the Central Bank's balance sheet, he said.


INACTION NOT AN OPTION


Shami's plan was also opposed by ministers allied to powerful Iran-backed group Hezbollah, which voted against the roadmap in cabinet last month.

Hezbollah deputy chief Naim Qassem hinted to Reuters in an interview on Monday that a fresh plan would have to be negotiated since parliamentary elections in Lebanon in May had triggered a new government formation process.

Shami said it would "not make much sense" to change the plan given the backing it had already received from the IMF and the international community.

Lebanon's economic downturn began in 2019 but accelerated in the spring of 2020 when it defaulted on a $1.2 billion Eurobond. Since then, the Central Bank has spent about half of Lebanon's foreign exchange reserves to stand up the collapsing local pound and subsidising goods, including wheat and medication, Shami said.

"Judging by the amount of reserves we have right now, which are $10, $11 billion, and if you assume an average spending of $400-500 million a month then you can do the math – probably a few months you would run out of reserves," he said.

He said the only way to recover would be for Lebanon's parliament to quickly pass a "package of laws" – among them capital controls, a reformed banking secrecy law, and a banking restructuring plan – that would grant it access to IMF funding.

Shami said he would start meeting with lawmakers soon to urge them to push the laws through quickly, saying "inaction is not an option anymore for us".

Newsletter

Related Articles

Arab Press
0:00
0:00
Close
China Criticizes US for Vetoing UN Ceasefire Resolution in Gaza
Saudi Arabia ranks first in UN index for e-government services in MENA
Israel Records 20% Drop In GDP, War In Gaza Is The Reason
Saudi Arabia's FDI Inflows Grow with New International Standards
Venture Capitals Power Up Across MENA Region
PM Modi Announces Opening Of New CBSE Office In Dubai
January Funding for MENA Startups Totals $86.5 Million
Saudi Arabia accelerates digital economy growth through Nvidia partnership
Israel unveils tunnels underneath Gaza City headquarters of UN agency for Palestinian refugees
Israel deploys new military AI in Gaza war
Egypt threatens to suspend key peace treaty if Israel pushes into Gaza border town, officials say
Saudi Arabia Warns Of A "Humanitarian Catastrophe" If Israel Moves On Rafah
US University To Shut Qatar Campus Due To "Heightened Mideast Instability"
Facebook and Instagram Ban Iran's Supreme Leader
Defense Technology Showcase Held in Riyadh
Saudi Arabia’s non-oil exports rise 2.5% to $6bn in November 2023: GASTAT
Rolls-Royce Executive Encourages Saudi Women to Tap into Their Inner 'Superhero' for Success in Defense Industry
Saudi Arabia launches National Academy of Vehicles and Cars
Saudi Tourism Minister Reveals Plan for 250,000 New Hotel Rooms by 2030
SAR to more than double eastern network passenger capacity with new trains deal
Saudi Arabia Enhances National Defense with New Partnerships
Saudi Aramco Maintains Arab Light Crude Pricing to Asia for March
NEOM Establishes New York Office to Support Investors
Saudi Wealth Fund Draws in Over $25 Billion Worth of Investments in Three Years, Al-Rumayyan Reveals
The Saudi Kingdom's Ultimatum to Israel: A Win-Win Peace with Saudi Arabia and the Arab World, or a Lose-Lose Continued Occupation and Endless Conflict
Biden condemns anti-Arab hate after WSJ opinion piece calls Dearborn ‘jihad capital’
Turkey Releases Seven Hostages Captured by Pro-Gaza Gunman
Arab Parliament Commends Women's Contributions to Societal Development
British and Hungarian Foreign Ministers visited Lebanese leaders to stress the importance of enacting UN Resolution 1701
Yemen's Houthis Say They Targeted British Merchant Vessel In Red Sea
Donald Trump Nominated for Nobel Peace Prize for 'Historic' Middle East Policy
US lawmakers approve F-16 jet sale to Turkey following NATO expansion support
Saudi Arabia Climbs 25 Places in World Bank's National Statistics Indicator
Tourism Growth in Saudi Arabia Fuels Advancements in the Hospitality Industry," Says Rotana Official
Houthi Rebels Request Departure of UN Staff from Yemen, Including US and UK Personnel, within a Month
Modi Inaugurates Hindu Temple on Site of Demolished Mosque in India
Over 25,000 Deaths in Gaza Amid Israeli Offensive
Escalating Clashes in Gaza as Israel Distributes Leaflets to Assist in Locating Hostages
Turkey's First Astronaut Set to Launch for International Space Station Today
Head of Palestinian Investment Fund Warns More People May Die of Hunger Than War in Gaza
Palestinian Envoy Criticizes UK for Alleged 'Double Standards' in Policies Toward Israel
Morocco to Lead UN Human Rights Council in 2024
Is artificial intelligence the solution to cyber security threats?
Egypt has been identified as the leading military force among Arab nations and ranks 15th globally
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Iranian Nobel Laureate Narges Mohammadi Receives Additional Prison Sentence
"Gazans Urge Israeli Forces to Target Hamas in Leaked Audio"
Biden States US and UK Airstrikes on Houthis Were a 'Defensive Action
Large Pro-Palestine Rally in London as Gaza Conflict Hits Day 100
South Africa Urges World Court to Halt Israeli Actions in Gaza
×