Lebanon PM to announce long-awaited banking law draft

Lebanese Prime Minister Nawaf Salam will announce today a long-awaited banking draft bill, which envisions sharing losses from the 2019 economic crisis between banks and the state, a Lebanese official says.

The legislation, which has come to be known as the fiscal gap law, is a key demand from the international community, which has conditioned economic aid to Lebanon on financial reforms.

Salam “will address the Lebanese people ahead of distributing the long-awaited (fiscal) gap draft law to ministers of cabinet, and cabinet will start discussing it on Monday,” a Lebanese official who requested anonymity tells AFP.

The law stipulates that each of the state, the central bank, commercial banks and depositors will share the losses accrued as a result of the financial crisis.

According to government estimates, the losses resulting from the financial crisis amounted to about $70 billion, a figure that is expected to have increased over the six years that the crisis was left unaddressed.

The International Monetary Fund, which closely monitored the drafting of the law, 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 Lebanon criticized the draft law on Monday, saying in a statement that it contains “serious shortcomings” and harms commercial banks.