Lebanese banks have announced that they cannot abide by the latest decision of the Central Bank of Lebanon regarding paying depositors fresh U.S. dollars on a monthly basis.
In a statement that followed the Banque du Liban’s (BDL) announcement of the said decision, the Association of Banks in Lebanon (ABL) stressed that banks are “unable to provide any cash in foreign currency, no matter how low its value.”
This is because Lebanese banks’ foreign currency liquidity with correspondent banks “is still negative by more than a billion dollars,” the ABL explained, citing central bank statistics.
According to the ABL, cash withdrawals can only be provided by reducing the mandatory reserve rate required on bank deposits with the Central Bank.
The statement noted that the obligatory reserve basically constitutes a guarantee for depositors and is resorted to in crises and emergency situations, “such as the ones that exist in Lebanon today.”
Finally, the ABL asked Central Bank Governor Riad Salameh to wait before issuing any circular that forces banks to commit to cash withdrawals in foreign currency, “hoping that it would be part of the Capital Control law proposal being circulated in Parliament.”