Lebanon's central bank forms committee to restructure commercial banks

BEIRUT: Lebanon’s central bank set up Thursday a committee to restructure commercial banks aimed at "preserving" the banking sector. 

The committee, headed by the central bank's second Vice Governor Bachir Yakzan, will "assess the performances of banks," according to a memo obtained by Annahar. 

A number of commercial banks' future is at risk after partaking in central bank governor Riad Salameh's financial engineering schemes to attract foreign currency in 2016. 

They purchased high-risk government issued treasury bills that boosted their revenues to $2.6 billion in net profits in 2017. 

In March, the government defaulted on $90 billion in debt, held mostly by commercial banks and the central bank. 

With dollar reserves dwindling, banks have implemented stringent de facto capital controls that have over time completely cut off dollar withdrawals.

Instead, depositors have been forced to withdraw their dollars in lira at a rate of LBP 3,850 per dollar, lower than that of the black market.

The Lebanese pound is currently trading at around LBP 8,250 against the dollar, representing a significant loss for depositors.

Months ago, Lebanon's government presented an economic recovery plan that seeks to write off commercial banks' equity before entering into negotiations with the International Monetary Fund. 

The plan received major pushback from banks and parliament's budget committee, who along with the central bank, sought to minimize the losses. 

In response, the IMF called on officials this week to "united behind the government's plan," adding that the IMF is ready to work “together with the authorities to improve the plan where this is necessary.”