Lebanon's banking restructuring law violates the principles of sound legislation
Lebanon's parliament passed a major piece of legislation on Thursday that could finally begin restructuring the country's broken banking sector, nearly six years after its collapse.
The law, approved earlier this week by parliament's finance and budget committee before being sent to the general assembly, marks the first serious step by lawmakers to tackle the country's unprecedented financial crisis, which has left millions of depositors locked out of their savings since 2019.
Lebanon's economic meltdown, widely blamed on decades of corruption, mismanagement, and unsustainable public spending, has been deepened by the
ruling elite
's resistance to meaningful banking reforms.
Politicians and bankers have long blocked efforts to overhaul the sector, fearing personal and institutional losses.
One of the main conditions set by international lenders for financial assistance has been the passage of a bank restructuring law, alongside other key legislation. In April, Lebanon
amended its banking secrecy law
, ending decades of financial opacity.
Washington and the International Monetary Fund are among those believed to be pushing Beirut to fast-track such reforms in order to unlock bailout funds.
The Bank Restructuring Law should establish a legal and institutional framework for dealing with insolvent or 'zombie' banks – those that have no capital and are unable to operate.
The legislation will replace the existing Banking Control Commission with a new Bank Restructuring Authority, empowered to restructure, recapitalise, merge, or liquidate failing banks. The aim is to stabilise the sector and pave the way for returning funds to small and medium depositors.
Roughly 84 percent of bank accounts in Lebanon – those with balances of $100,000 or less – make up about $20 billion in trapped funds, and depositors hope the law will help recover some of their savings.
'The law is, albeit long overdue, a welcome step in the right direction,' political economy researcher Jonathon Cole told
The New Arab
.
RELATED
Lebanon's central bank bans dealings with Hezbollah finance arm
Lebanon
The New Arab Staff
'For nearly six years, depositors have borne the brunt of Lebanon's financial collapse, brought on by the disastrous polices of kleptocrat-in-chief
Riad Salameh
and the greed of the commercial banks.'
Former long-time Central Bank chief Riad Salameh and other bankers are either in prison or under investigation for corruption charges.
'This law, if implemented in good faith, offers the first real opportunity for the state and banking sector to regain the trust of the public and the international community,' added Cole.
'Not enough'
Although a major milestone, the Bank Restructuring law is not enough without another a 'Financial Gap' legislation – a mechanism that would allocate losses among different parties.
The Lebanese government says financial losses in the banking sector are about $70 billion. A Financial Gap law would make the state, Central Bank, commercial banks, and possibly depositors shoulder these losses.
The law would also provide a transparent accounting framework to support depositor compensation and restructuring plans.
While the Bank Restructuring law provides legal authority to restructure or liquidate banks, it cannot be enforced until the Financial Gap law is also passed.
Finance Minister Yassine Jaber says the Financial Gap law will be studied and sent to parliament for approval within six months.
Associations lobbying for depositors' rights have warned against attempts to burden account holders with any losses, saying only successive governments and the banks are responsible for this meltdown.
Some observers have blasted the government for putting forward the Bank Restructuring law before the Financial Gap law, saying it should have happened the other way round for effectiveness.
Lebanese economy expert and journalist Mounir Younes believes what is being discussed in parliament 'is a deficient law that offers no real solutions,' but instead gives banks a lifeline.
'It flagrantly violates the principles of sound legislation and reflects a lack of political will to confront the financial crisis at its roots. A reform that does not determine the fate of financial losses or assign responsibility is reform in name only. It is nothing more than a painkiller for a cancer patient,'
he wrote on X
.
(New Arab)
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Ya Libnan
2 days ago
- Ya Libnan
Lebanon's banking restructuring law violates the principles of sound legislation
Depositors have warned against any law that would make them bear responsibility for financial losses, arguing that the government, Central Bank and commercial banks are to blame for the crisis [Getty] Lebanon's parliament passed a major piece of legislation on Thursday that could finally begin restructuring the country's broken banking sector, nearly six years after its collapse. The law, approved earlier this week by parliament's finance and budget committee before being sent to the general assembly, marks the first serious step by lawmakers to tackle the country's unprecedented financial crisis, which has left millions of depositors locked out of their savings since 2019. Lebanon's economic meltdown, widely blamed on decades of corruption, mismanagement, and unsustainable public spending, has been deepened by the ruling elite 's resistance to meaningful banking reforms. Politicians and bankers have long blocked efforts to overhaul the sector, fearing personal and institutional losses. One of the main conditions set by international lenders for financial assistance has been the passage of a bank restructuring law, alongside other key legislation. In April, Lebanon amended its banking secrecy law , ending decades of financial opacity. Washington and the International Monetary Fund are among those believed to be pushing Beirut to fast-track such reforms in order to unlock bailout funds. The Bank Restructuring Law should establish a legal and institutional framework for dealing with insolvent or 'zombie' banks – those that have no capital and are unable to operate. The legislation will replace the existing Banking Control Commission with a new Bank Restructuring Authority, empowered to restructure, recapitalise, merge, or liquidate failing banks. The aim is to stabilise the sector and pave the way for returning funds to small and medium depositors. Roughly 84 percent of bank accounts in Lebanon – those with balances of $100,000 or less – make up about $20 billion in trapped funds, and depositors hope the law will help recover some of their savings. 'The law is, albeit long overdue, a welcome step in the right direction,' political economy researcher Jonathon Cole told The New Arab . RELATED Lebanon's central bank bans dealings with Hezbollah finance arm Lebanon The New Arab Staff 'For nearly six years, depositors have borne the brunt of Lebanon's financial collapse, brought on by the disastrous polices of kleptocrat-in-chief Riad Salameh and the greed of the commercial banks.' Former long-time Central Bank chief Riad Salameh and other bankers are either in prison or under investigation for corruption charges. 'This law, if implemented in good faith, offers the first real opportunity for the state and banking sector to regain the trust of the public and the international community,' added Cole. 'Not enough' Although a major milestone, the Bank Restructuring law is not enough without another a 'Financial Gap' legislation – a mechanism that would allocate losses among different parties. The Lebanese government says financial losses in the banking sector are about $70 billion. A Financial Gap law would make the state, Central Bank, commercial banks, and possibly depositors shoulder these losses. The law would also provide a transparent accounting framework to support depositor compensation and restructuring plans. While the Bank Restructuring law provides legal authority to restructure or liquidate banks, it cannot be enforced until the Financial Gap law is also passed. Finance Minister Yassine Jaber says the Financial Gap law will be studied and sent to parliament for approval within six months. Associations lobbying for depositors' rights have warned against attempts to burden account holders with any losses, saying only successive governments and the banks are responsible for this meltdown. Some observers have blasted the government for putting forward the Bank Restructuring law before the Financial Gap law, saying it should have happened the other way round for effectiveness. Lebanese economy expert and journalist Mounir Younes believes what is being discussed in parliament 'is a deficient law that offers no real solutions,' but instead gives banks a lifeline. 'It flagrantly violates the principles of sound legislation and reflects a lack of political will to confront the financial crisis at its roots. A reform that does not determine the fate of financial losses or assign responsibility is reform in name only. It is nothing more than a painkiller for a cancer patient,' he wrote on X . (New Arab)
L'Orient-Le Jour
2 days ago
- L'Orient-Le Jour
Jaber wants to know how IMF SDRs allocated to Lebanon were spent
Finance Minister Yassine Jaber said he has asked several ministries and agencies to provide all 'documents and supporting evidence' related to the use of the funds allocated to Lebanon by the International Monetary Fund (IMF) through Special Drawing Rights (SDRs) in recent years. 'The finance minister sent letters to the ministries of Energy, Water, Public Health, Economy and Trade, Public Works and Transport, and Interior and Municipalities — General Directorate of General Security — as well as the Higher Relief Committee, asking them to provide detailed explanations and the necessary supporting documents regarding payments due or transferred to their bank accounts, as well as the settlement of sums funded by SDR proceeds,' according to a statement released Friday evening. Contacted by L'Orient-Le Jour, the minister explained his approach: 'The Audit Court published a report on SDR expenditures, so we need to follow up. As you know, SDRs constitute a loan, not a grant, and all spending must be carried out in accordance with the public accounting law, which was not properly applied, likely due to the circumstances prevailing at the time. We are therefore working to gather all the facts,' he added. Lack of clarity and transparency The report the minister referred to was published May 6, 2025, following an initiative launched by opposition MPs Paula Yacoubian, Yassine Yassine, Najat Aoun Saliba and Melhem Khalaf, who questioned how the aid worth $1.139 billion in SDRs allocated to Lebanon in September 2021 had been spent. In its findings, the court criticized the lack of clarity and transparency in the use of these funds and in the documentation available to track them, highlighting the risk that part of the money had been misused. It recommended the creation of a clear and legal mechanism for the accounting management of SDRs to optimize their use in the future. SDRs — allocated according to each country's IMF quota — are a financial instrument distinct from any conditional aid offered through an IMF program. Allocations are typically made every five years by the IMF Board of Governors. SDRs can be converted into currency via another IMF member or a dedicated mechanism, and they generate SDRI interest until they are reconstituted, making them a form of loan rather than a grant. To stop interest payments, a country must repurchase SDRs on the market — using its own currency — to return its holdings to the original level. Released just as Prime Minister Najib Mikati's Cabinet took office, Lebanon's SDR allocation was spent in less than two years amid a deepening economic and financial crisis. In October 2023, caretaker Finance Minister Youssef Khalil and Banque du Liban (BDL) told the Finance Committee that only $76 million remained from the initial amount. According to figures disclosed at the time, 45 percent of the total was spent on medicine subsidies ($478.3 million); 15.4 percent went to repaying loans, notably to the World Bank ($163.5 million); 15.3 percent funded transfers to Électricité du Liban (EDL) for fuel and maintenance ($162.2 million); 12.6 percent was spent on wheat subsidies ($134.2 million), which were still in effect; and 6.5 percent covered subsidies on gasoline and diesel ($69.4 million), which were fully lifted in September 2022. While Jaber said his request for clarification is solely based on the Audit Court's findings, it may also serve to reassure the IMF of the government's commitment to reform — especially following Parliament's adoption of the banking resolution law and the law on judicial independence, and just two months ahead of a key IMF meeting during the annual joint sessions with the World Bank in Washington in October. Insurance expenses for Télé Liban employees In his statement Friday, Minister Jaber said, 'The adoption of the banking resolution law is a clear and explicit message to all observers, both inside and outside the country, and to all those committed to the rebirth of Lebanon and its economy.' He thanked Parliament — and Speaker Nabih Berri, head of the Amal Movement to which Jaber belongs — for passing the legislation. He added that the government would accelerate efforts to finalize another critical bill, one that will address the distribution of tens of billions of dollars in banking losses and resolve the issue of returning deposits. Jaber also announced he had approved the release of funds from the 2025 budget reserves to cover insurance expenses for employees of the state-run broadcaster Télé Liban and confirmed he is following preparations for the 2026 budget plan.
Ya Libnan
2 days ago
- Ya Libnan
Lebanon's Political Class still shielding the architect of Its financial collapse
Riad Salameh who was once internationally seen as the guardian of Lebanon's financial stability, has fallen from grace long time ago . He spent his final weeks in office a wanted man, faced with French and German arrest warrants that have been prompted by long-running corruption probes. By: YaLibnan Once again, Lebanon's parliament has proven it is more interested in protecting itself than protecting the Lebanese people. The recent legislation—presented as a step toward financial reform—does nothing to address the core of Lebanon's economic collapse. It reflects a complete lack of political will to uncover the truth, deliver accountability, or rescue the nation's economy from further ruin. At the heart of the financial catastrophe lies one of the most egregious Ponzi schemes in modern history, masterminded by the long-serving Central Bank Governor, Riad Salameh. For decades, Salameh artificially propped up Lebanon's banking system through unsustainable financial engineering that required constant inflows of new deposits to pay off old obligations—classic Ponzi scheme mechanics. When the inflows stopped, the entire system collapsed. The Lebanese people—especially the small and middle-class depositors—were left holding the bag. Instead of being held accountable, Salameh was protected. For years, Lebanon's ruling elite shielded him, allowing him to operate above the law. He was indispensable to their survival: his schemes funded the corrupt political machine, allowed unsustainable state borrowing, and enriched banks tied to the ruling parties. When European countries—particularly France, Germany, and Luxembourg—launched criminal investigations and issued international arrest warrants, the Lebanese judiciary did nothing. Not only did Lebanon refuse to extradite him, but its institutions closed ranks around him. It wasn't until international pressure became too loud to ignore that the political establishment staged a new maneuver: Salameh was quietly arrested in Beirut in September 2024 and placed in pretrial detention. At first glance, this looked like justice at last. But in truth, it was another calculated move by the ruling class—not to prosecute him, but to protect him from facing justice abroad. Lebanon does not extradite its citizens, and by detaining Salameh locally, the authorities ensured he would never face European courts or reveal the full extent of the financial crimes that implicate them all. This isn't justice. It's obstruction. Where did the depositors' money go? It went to fund decades of deficits, bloated public institutions, phantom infrastructure projects, and private enrichment. It vanished into luxury real estate in Europe, offshore accounts, and shady deals approved and facilitated by political and banking elites. The man who knows where every dollar went—Riad Salameh—sits in a Lebanese jail, protected by the very people who should be standing trial with him. Parliament's latest legislation does nothing to recover the stolen funds, hold the guilty accountable, or implement real financial reform. It is yet another smokescreen—an attempt to buy time, deflect blame, and preserve a dying system that benefits the few at the expense of the many. Lebanon will not be saved by cosmetic reforms or symbolic arrests. It needs truth. It needs accountability. And above all, it needs an end to the culture of impunity that has allowed an entire country to be looted in broad daylight. The Lebanese people deserve to know: Who stole their money? Where is it? And why are the thieves still in power? Until those questions are answered, recovery is impossible. Justice delayed is justice denied.
