Lebanese depositors to get frozen funds back over time, Economy Minister pledges
Depositors in Lebanon will get their funds frozen in the country's struggling banks over time as part of an overhaul of the Lebanese financial system, Economy Minister Amer Bisat said.
The state, central bank and lenders in the country will share the burden of repairing the crisis-stricken economy, he told Bloomberg TV in an interview on Monday.
'Depositor protection is an extremely important part of the objectives that we have in place. That may require instruments, that may require delays, or some time passage in order to pay, but the idea is that nobody would lose their deposits. But it may take time,' Mr Bisat said.
The commitment to depositors, who have been waiting for their funds to be released for years, is part of an attempt to break a stalemate on reforms, which are needed to unlock fresh funds from the International Monetary Fund and help the country emerge from one of the world's worst financial crises.
Officials have struggled to reach a deal for years, with local lenders refusing to shoulder the bulk of losses and forced consolidation to strengthen institutions and increase the size of their balance sheets.
In September last year, Lebanon's then-interim central bank governor Wassim Mansouri said giving people their funds would not be 'impossible' and depositors should not 'have to wait for an extended period'.
People in Lebanon have been waiting to access to their life savings stuck in banks since 2019, as the country endures a severe financial crisis. Lebanese banks imposed arbitrary restrictions on their clients since after the state failed to honour its bond commitments. The economy went into a tailspin and the Covid-19 pandemic exacerbated the country's economic crisis to historic proportions.
The 2019 economic collapse was blamed on decades of financial mismanagement and corruption by Lebanon's ruling elite. Former central bank governor Riad Salameh has also been accused of helping to embezzle hundreds of millions of dollars from the central bank.
Lebanon in March appointed wealth manager Karim Souaid central bank governor, filling a position that had been held by the interim chief since July 2023.
Changes to Lebanon's banking sector are among the key reforms demanded by international backers and lenders before the country can receive assistance.
In April 2022, Lebanon reached a staff-level agreement with the IMF on a comprehensive economic reform programme supported by a 46-month extended fund facility, proposing access to about $3 billion. However, Lebanese authorities have been accused of dragging their feet on the required reforms.
Mr Bisat, a former BlackRock executive, on Monday said the country's financial crisis requires a 'collective solution'. But it also needs to ensure the survival of the banking sector and the central bank's ability to conduct monetary policy, he said.
'There's a limit to how much we can impose on each of them,' he told Bloomberg.
The minister said the a law approved last week to lift banking secrecy will be passed in parliament in the next few weeks, giving the government a better sense of the capital gap in each of the banks.
From 2016, the central bank began to channel billions of dollars of depositor funds to cover the government's deficits and finance the peg.
Lebanon estimates its overall losses to surpass $70 billion, more than triple the size of the country's economy.
Beirut aims to organise an investor conference in September, which Mr Bisat told Bloomberg he hopes it would tell the world that "Lebanon is back in business".
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