After more than 18 months of the banking, economic and financial crisis and in spite of the unlawful errors tainting Circular 154, the Central Bank has propagated a statement in which it injects false positivism. This is that the Lebanese public expects it to manage the crisis while it also explains how financial engineering protected Lebanon and its people from the worst.
This statement is nothing but a blatant attempt to buy time and postpone the inevitable popular uprising due to the deteriorating crisis. On this basis, it is essential to clarify the following points:
The Central Bank of Lebanon while covering Lebanese bank’s seizure of depositors’ money now wants to give the same depositors a few crumbs from their money. After the subsidies will have been lifted the depositor will get his pocket money to spend. Following the governor‘s policy, depositors have been impoverished and have suffered humiliation and now to reduce the number of needy families he wants to give depositors the financial means to only buy basic goods once the subsidies have been lifted.
In a further break with the laws implicating the Association of Banks and in contrast to the Monetary and Credit Law dealing with the Central Bank, in particular, Article 70, the Central Bank has taken upon itself to launch initiatives and negotiate with banks the return of deposits. It is as if the Central Bank has acknowledged that banks have frozen deposits in order for them to stay solvent. This is instead of obliging the banks to adopt a mechanism that would launch a gradual reimbursement of deposits.
Out of his imagination, Riad Salameh has set the amount at 25000 dollars without stating the source of the dollar collateral and without referring to the remaining sums. With an unclear mechanism concerning haircut policy and no accurate evaluation of deposits prior to October 17 and post-October 17, the dollar that he aspires to pay out to depositors is, in reality, non-existent and is nothing but pie in the sky. We should not forget that depositors have lost more than 70% of the value of their deposits while the failure of the banks to pay them In the currency in which they were deposited is a legal violation and constitutes a crime as stipulated by the Lebanese Penal Code.
The Central Bank of Lebanon has seemed to forget that among the fundamental tasks of its various committees and entities is the monitoring of bank operations, the preservation of deposits, all the while ensuring the soundness of the banking system. In addition, it requests periodic reports from banks and obliges them to rectify any lapses. if the Central Bank’s claim that Lebanese banks have successfully implemented Circular 154 is correct then we can say that confidence in banks, the Central Bank, it’s Governor and all affiliations have eroded. This is because banks asked to postpone the deadline of the Circular which itself is an indication of their inability to obtain liquidity from foreign banks.
Riad Salameh is requesting legal cover for his latest engineering innovation to enable the depositor to withdraw his money but there is no need for it. The argument for legal cover may be valid when dealing with the concerns of the judiciary and the street.
Relative to the Central Bank circulars or the request for deposit data from banks issued on May 5, 2021, despite him already having this data. Overall, it shows that he is targeting the second tranche of middle-class depositors after having eradicated a large portion of small depositors through his circular 148. This request for data is a result of the change in the size of these medium deposits since many of the holders withdrew significant sums at the exchange rate of 3900 LBPS to the US dollar. The Governor is trying to eliminate remaining medium depositors in violation of the law and by an irrational mechanism. The Central Bank of Lebanon via its statement injects a new dose of morphine and false hope aiming to protect the Central Bank, its Governor, the banks and the rest of the ruling oligarchy from popular rage.
The Central Bank previously launched an exchange platform in June last year but it failed miserably to achieve its stated objectives unless its covert goal was to pauperize the people. Re-activating this platform with the input of banks as new players will not modify exchange rates in the black market and will not control the rate if the launching rate is lower than the market rate. This is especially true since the Lender of Lebanon himself admits that the dollar price is determined by the market mechanism of supply and demand. Even if the Central Bank intervenes in the market to control the rate, this can only happen through the injection of fresh dollars. This is a commodity that is in very short supply at the Central Bank.
The Central Bank’s assertion that it still believes in selling the dollar to banks at the official rate for all raw materials designated by the Government and that it is committed to this is an escape from banking reality. This is especially true given the numerous exchange rates it supports as well as the launch of the banking platform. The official rate remains 1507 LBPS to the US dollar. The subvention program and the manner in which it is applied is illegal although its rationing is not yet near given the absence of a government.
This is to say that the above actions are band-aid solutions and we can classify this approach as a localized approach to the treatment of crises that we reject. The Lebanese Parliament must assume its responsibility towards depositors and put in place the required legislation to stop the bleeding and also put a brake on the Central Bank’s oppression of depositors and their deposits. Parliament should develop a comprehensive and transparent plan that monitors all facets of the crisis and propose a just and fair solution without adding to the burden on depositors.