“RED TV”
The expert in monetary and banking law, Professor Tawfiq Shambour, considered that the essence of the financial and banking crisis in Lebanon is still primarily legal, criticizing the path that was followed during the past years in dealing with losses and responsibilities, and pointing out that there are clear discrepancies between the approach of the Governor of the Bank of Lebanon and the requirements of the International Monetary Fund, at a time when the file of depositors’ funds and interests and the restructuring of the banking sector have returned to the forefront of discussion.
In an interview on the “3:15 Economy” program on “RED TV,” Shambour explained that “what happened was an amendment to the bank reform law at the request of the International Monetary Fund,” pointing out that the discussion witnessed a confrontation between “points raised by the Governor of the Bank of Lebanon and he adhered to, and others put forward by the International Monetary Fund and insisted on adopting them.”
He pointed out that what the Governor of the Bank of Lebanon is requesting “is different from what successful banks are requesting,” considering that the Governor is mainly focusing on the exchange rate and not on the banks.
Chembor went further in his criticism of the role of the Central Bank, saying that “the Bank of Lebanon, which constitutes the basis of the problem, is today in the position of arbiter and opponent at the same time.”
In his assessment of the path followed since the outbreak of the crisis, Chembor said: “During 7 years, there was no actual approach to addressing the financial crisis, but rather the crimes were camouflaged and responsibilities were shifted away.”
He added, “There is a flaw in this overall plan,” noting that he was relying on Prime Minister Nawaf Salam and his legal background in approaching this file, stressing that “the problem, in its essence, is purely legal.”
Shambor recalled Iceland’s experience in dealing with its financial crisis, saying, “In Iceland’s crisis, the law was chosen instead of seeking help from the World Bank, and the authorities severed their relations with it, launched legal prosecutions, and sent a large number of bankers to prison, and the prime minister was also dismissed.”
Regarding depositors’ funds, he explained that the issue of deductions from them was raised twice, recalling that the former Governor of the Bank of Lebanon, Riad Salameh, announced that there would be no “haircuts” or “capital control,” but Shambour considered that Salameh “began his term by violating the law.”
He also stopped at the issues of restructuring and deductions from depositors’ funds, saying: “There are two basic expressions: restructuring and deductions from depositors’ funds, while the Financial Regulatory Law stipulates zeroing out all interests.”
On the other hand, Chembor pointed out that “the International Monetary Fund says that banks must increase interest rates,” which, according to his proposal, places the issue of interest at the heart of the existing differences over how to address the crisis and reorganize the banking sector.
Between the dispute over the bank reform mechanism, the fate of interest and depositors’ funds, and the role of the Bank of Lebanon in managing the next stage, Chembor returned the discussion to a point that he considers the basis: any financial treatment that is not based first on defining responsibilities and implementing the law will remain, in his view, incapable of ending the crisis.
