Lebanon drafts long-awaited banking law to meet funding shortfalls in financial system

Lebanese Prime Minister Nawaf Salam said on Friday that the government had put forward ​a long-awaited banking draft bill that distributes losses from the 2019 economic crisis between banks and the state.

The draft law had been demanded by the international community, which has made financial reforms a condition of economic aid to Lebanon.

In a televised speech, Mr Salam said “this draft law constitutes a road map to getting out of the crisis” that grips Lebanon.

The draft will be discussed by the Lebanese Cabinet on Monday before being sent to parliament, where it could be blocked.

Lebanon has been mired in an economic crisis for six years, a situation compounded by last year’s war between Israel and Iran-backed Hezbollah. Beirut is seeking foreign assistance to help to rebuild and revive its economy.

Under the proposed law, losses incurred during the crisis would be shared among the state, the Central Bank, commercial banks and depositors.

Depositors, who lost access to their funds after the 2019 crisis, will be able to retrieve their money, up to $100,000, over four years.

Mr Salam said that 85 per cent of depositors had less than $100,000 in their accounts.

The wealthiest depositors will have the remainder of their money compensated with asset-backed securities.

“I know that many of you are listening today with hearts full of anger, anger at a state that abandoned you,” said Mr Salam.

“This bill may not be perfect … but it is a realistic and fair step towards restoring rights, halting the collapse.”

The International Monetary Fund, which closely monitored the drafting of the bill, had previously insisted on the need to “restore the viability of the banking sector consistent with international standards” and protect small depositors.

The Associations of Banks in L