Lebanese banks in battle with depositors

Lebanon’s Banque du Liban has forced banks to allow depositors to withdraw $400 per month and the equivalent amount in Lebanese pounds, the central bank said in a circular released late on  Friday.

On Wednesday, a decision announced by the Banque du Liban to block all withdrawals from depositor accounts in dollars triggered protests in the streets including burning tyres.

The central bank then withdrew that decision.

Details of the decision will become public next week. The central bank has reportedly offered to provide banks with dollars to pay part of the total amount, but how much would come from the central bank, and how much local banks would have to pay has not yet become clear.

There are  concerns that banks will not follow the banks instructions, according to banking sources cited by the Al-Anba news portal of the Progressive Socialist Party.

A leaked letter sent by the Association of Banks in Lebanon to Central Bank Governor Riad Salameh meanwhile said that “banks cannot pay any cash sums in foreign currency no matter how low the sums may be. Banks’ foreign currency liquidity at the correspondent banks is still negative by more than $1 billion, adding that “any cash withdrawals can only be provided through lowering banks’ obligatory reserve at the central bank.”

The central bank has offered to provide commercial banks with dollars at the rate of 12,000 LL / USD. The banks will in turn be able to sell these dollars at the rate of 12,120 Lebanese pounds per dollar.

This would be a much higher rate than that normally offered by the banks to depositors.

Lebanese banks had locked depositors out of their dollar accounts and blocked transfers abroad since the country was gripped by a financial crisis in late 2019.

Under a central bank circular issued last year, depositors were permitted to withdraw funds from their dollar accounts, paid in the local currency, but only at a rate of 3,900 per dollar.