Lebanon’s financial crisis has severely impacted the country’s economy, and depositors are growing increasingly concerned about their funds.
Delving deeper into the government’s latest plan, according to LBCI, it is crucial to note two key figures:
- The total deposits in Lebanese banks amount to $93.5 billion.
- The banks hold only $21 billion in return.
This $21 billion is distributed as follows:
- $4 billion held abroad by correspondent banks for import transactions and loan repayments to international institutions.
- $6 billion in loans granted by banks to the private sector, which will be repaid over time.
- Approximately $1 billion in Eurobonds is owed by banks to the state.
- $10 billion in mandatory reserves held by banks at the Central Bank of Lebanon.
Of the total deposits, 88% represent small depositors (less than $100,000), and the remaining 12% belong to large depositors.
The government’s latest plan proposes returning $100,000 to each depositor, ensuring that all funds for small depositors are returned.
However, for larger deposits, the process is more complicated.
For those with more than $1 million in deposits, they will be required to provide evidence to the bank about the source of these funds.
Any interest gains from high-interest rates after 2015 will be deducted from the deposit for those with balances above $100,000.
Additionally, there is a crucial condition: if funds were transferred from LBP to USD after October 2019 at the 1,500 rate, the deposit will be considered “ineligible.”
In this case, the depositor will be refunded in LBP at an exchange rate lower than the market rate.
The government’s plan for larger deposits involves several steps:
- Deducting any interest gains from high-interest rates after 2015 from the deposit.
- Converting a portion of the deposit into bank shares, valued at $12 billion.
- Converting another portion from dollars to LBP at a rate lower than the market rate, worth $4 billion.
- Transferring the remaining funds to the Deposit Recovery Fund.
The Deposit Recovery Fund is expected to be financed through various sources, such as:
- The remaining funds in banks after paying deposits under $100,000.
- Recovered stolen and suspicious funds.
- A percentage of banks’ profits.
- Potential contributions from state assets.
However, the precise amount of funds that the recovery fund can secure remains unknown.
Many argue that the state’s participation in the fund should be limited, as funds derived from state assets should serve all citizens and future generations, not just large depositors.
Despite the existence of a plan, Lebanon’s key challenge remains the effective implementation of proposed strategies.
Three and a half years into the crisis, progress remains limited, leaving depositors and the public anxiously awaiting concrete actions to resolve the precarious financial situation.
Until the government can effectively execute its plans, depositors’ funds and Lebanon’s economy will continue to face significant challenges.