Depositors Union warns the Association of Banks

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This is a warning sent to the Association of Lebanese Banks by the Depositors’ Union, following the decision of the State Shura Council and to prevent any misinterpretation by these banks, the deposit is to be returned as according to the law. The Union will pursue injustice to any bank that pays deposits in Lebanese Pounds.

Dear Association of Banks,

أما بعد،

The banks represented by your Association and protected by the Central Bank of Lebanon, for the past 18 months until now, have been weighing down depositors with losses caused by the banking crisis. The most insidious of these operations has been the issuance of Article 151 which authorizes the withdrawal of foreign currency deposits at an arbitrary rate of 3900 LBPs to the USD.

This circular which has been extended up to the end of September 2021 has systemically contributed to the loss of 70% of the value of deposits held by small and medium depositors. It was a winning strategy and completely in your interest to eradicate small accounts without incurring any losses from your side.

We, the Depositors’ Union, have been in opposition and will continue to combat all violations by you. This is why we wish to state the following:

The relationship between you and the depositor is intrinsically linked to the nature of a deposit. That is to say, it is a contractual relationship that is subject to clear and explicit laws such as the law of Obligations and Contracts, the law of Land Trade and the law of Money and Credit.

Article /690/ of the law of Obligations and Contracts states that a deposit is a contract, dynamic in nature, whereby the financial institution is the custodian of the deposited funds. The custodian is obliged to keep it and return it and is not entitled to a fee for holding the deposit unless the two parties agree to the contrary.

Article /701/ of the law of Obligations and Contracts states that the custodian shall not compel the depositor to recuperate his deposit before the agreed-upon terms unless there is a legitimate reason. The custodian must return the deposit when the depositor requests it in accordance with the maturity date.

Article /123/ of the Monetary and Credit law states that deposits are subject to the provisions of Article 307 of the Commercial Code.

Now, Article 307 states in its most literal sense that a bank that receives a sum of money in the form of a deposit becomes its custodian and must return it on the first request of the depositor at its value in one payment or several payments. This shall be done according to the deadlines or prior notifications that are specified in the contract. Furthermore, Paragraph F of the Lebanese Constitution stipulates that our economic system is a liberal one, that it guarantees individual initiatives and private property and it adds in Article 15 that ownership is under the protection of the law.

After flouting all legal principles and your role as custodian of depositors’ money you then proceeded to withhold their deposits and abuse their trust, all the while incurring losses for them that exceeded 70%. Today you are also killing off the remaining rights of depositors by the ruse of halting payment at an exchange rate of 3900 LBPs and its replacement by the rate of 1500 LBPs. Both rates are illegal and this is an attempt to hoodwink people as to the correctness of your actions while ignoring the adjudgement of the State Shura Council.

You short-circuit a judicial decision without accountability or oversight. You and you alone are responsible for this debacle and you cannot present depositors with a fait accompli whereby they have to choose between two bad options. Deposits must be paid in their currency and if any of the banks that you represent are unable to comply with this, let them acknowledge their abject failure and declare bankruptcy.

By this modus operandi, their assets and properties can be liquidated and depositors’ rights can be restored. Let us assure you that in the absence of any legislative role and your continual oppression preventing payment of deposits in their currencies.

we, the Depositors’ Union will prosecute you before the competent judicial authorities both civil and penal. In addition to taking urgent measures against you by seizing your movable and immovable assets, we consider that you have ceased to protect the rights of depositors.

Your Association in collaboration with the Central Bank of Lebanon has exploited a corrupt system to avoid responsibility and blame the weaker partner in this contractual relationship and this to harvest make-believe profits at depositors’ expense. Ruinous consequences followed from your

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