The position of the Depositors’ Union on the statement of the Bank of Lebanon and the response of the Association of Banks

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05/06/2021

Less than two days after the State Shoura Council meeting the Governor of the Central Bank and his Committee issued circular obliging commercial banks to pay depositors. 400 USD per month in cash and 400 USD per month to be paid in LBPs at the exchange rate determined by the “sayrafa“ platform. This is for accounts opened before October 2019. The Association of Banks reacted quickly by declaring that it is not possible to pay any amount in a foreign currency.

It is important for the Depositors’ Union to state the following:

  • Deposits are as they are in their entirety

The decision taken by the Shoura Council confirms that the deposit as stated in the Code of Money and Credit should be returned as-is and in the currency agreed upon between the contracting parties. This is a right of depositors guaranteed by the Constitution and it cannot be waived or disregarded. The Union stresses that the policy of multiple exchange rates is illegal and unacceptable in that it is a disguised haircut on depositors’ money. The deposit is to be returned in the currency in which it was lodged and at the same value without any depletion on exit.

  • Banks have stopped paying so let them declare bankruptcy

The statement attributed to the Association of Banks dated 3/6/2021 in which they confirm their inability to secure the withdrawals of depositors may be considered an admission by the banks that they are in cessation of payment and insolvent. Accordingly, the Depositors’ Union calls upon the Central Bank to take immediate action and implement the monetary and credit law and law number 67/2 (banks in cessation of payment are subject to special penalties). Following this, the Depositors’ Union exhorts the judiciary to block all bank operations and seize the movable and fixed assets whether in Lebanon or not, of banks, bank owners, board members and senior management and appoint a specialized independent committee to manage these assets. Let the judiciary immediately seize the apartments, properties and yachts of bank owners and senior managers. The Union calls on the judiciary to quickly act on the bankruptcy lawsuit that the Union filed against banks last year.

The Union is surprised by the compliance of the Central Bank Governor, the President of the Republic and the elected members of parliament to the lobbying of the Association of Banks. This is particularly true given that the banks refused to finance any withdrawals from their foreign assets which are illegal and permanently dent any confidence in the banking sector.

  • The political authority bears the responsibility for the worsening of the crisis

Depositors’ Union holds this political authority as represented by the President of the Republic, the caretaker Government, the parliament, in particular, the finance and budget committee responsible for the current state of affairs. The Union also believes that the political establishment is aiming to pass a shadow financial plan burdening society in general and depositors in particular the cost of the financial crisis. This is to protect the privileges of a few banks aligned with political power. Instead of applying the law and encumbering bank owners and managers with the cost of the crisis, the President of the Republic and the parliament are protecting banks while endangering human, national and social security. The Depositors’ Union categorically rejects the policy of intimidation and pressure exerted by politicians and bankers conjointly against the Lebanese judiciary.

  • A comprehensive fair and transparent plan is the solution

From the beginning, the Depositors’ Union has reiterated that the only solution to the Lebanese financial crisis is the recognition of losses by way of a forensic audit on the Central Bank and Commercial Banks. This is to be followed by a comprehensive fair and transparent plan that restructures the public debt and also restructures the banking sector by holding accountable all the people and institutions responsible for the collapse. The policy of circulars has proven to be an abject failure and has turned Lebanon into a pariah state and in parallel has destroyed the confidence of the international community in the Lebanese economy and its banking sector. Based on the foregoing, the Union calls on the Lebanese judiciary to step up to its national role as stipulated in the constitution let the judiciary achieve justice.

Let it cut off the hands of board members and senior managers. Let it impose immediate seizure of bank assets. Let it protect depositors by implementing the provisions of the Monetary and Credit Law and the law on bank cessation of payments. The Union also calls on political officials especially the members of parliament to stop protecting banks at the expense of the Lebanese and the Lebanese nation. Stop these deplorable policies immediately.

The Union appeals to the population to take to the barricades and besiege the homes of politicians and bank owners and so put pressure towards a just and comprehensive financial solution.

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