Nine Lebanese banks with branches in Cyprus have been asked to provide reserves to protect deposits with the Central Bank of Cyprus — the demand does not address the three Cyprus-based banks which are partially owned by Lebanese companies, like Astrobank.
The central bank is clearly concerned that the ongoing tumultuous events in Lebanon could lead to bank failures, and so seeks protection for depositors. Lebanese banking sources confirmed this view.
The nine Lebanese banks in question have called a meeting with the Central Bank to review these issues, nonetheless. Some of the banks affected are concerned about their ability to provide reserves for deposits rapidly, as the memo, sent out in mid-December, requested a response from the Lebanese banks affected in five days.
Banks in Cyprus routinely place their deposits in custody with the central bank, so the demand is not extraordinary.
One banker from those banks affected, told the Lebanese newspaper Daily Star that the effect of the CBC circular to the Lebanese banks has been blown out of proportion.
“I can’t understand the fuss behind the circular. It’s a memo between CBC and the Lebanese banks operating in Cyprus. We are studying the request and will answer in due time,” the banker indicated.
Another leading Lebanese bank stressed that it saw no major challenge in the memo; it had already placed the equivalent of 100 per cent of its deposits in Cyprus with the CBC.
“They are just asking Lebanese banks to keep in the Central Bank of Cyprus the full equivalent of their customer deposits with them. In other words, if we have €20 million in deposits, we need to keep the same amount at CBC. For us, we’re already doing that so we have no problem,” the banker told the newspaper.
None of the nine banks concerned reportedly hold vast amounts in deposits, and, as a result, there should be no effect on the national banking system, according to banking sources.